Macroscope | China’s economy cannot afford a new setback amid the Ukraine war and pandemic

Global purchasing managers indices show new signs of stress, jeopardising hopes for an economic recovery amid inflation, Covid-19 and the Ukraine crisis

China needs quick, decisive policy intervention to meet its growth goals, including more deficit spending, tax cuts and government debt

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An employee works on an assembly line producing speakers at a factory in Fuyang, in eastern Anhui province, on March 31. Purchasing managers indices for manufacturers in China are showing worrying signs for the economy as domestic and global factors weigh on economic growth. Photo: AFP

Published: 1:30pm, 4 Apr 2022

It has been a long, uphill struggle for the global economy emerging from the shock of the Covid-19 pandemic. That task is now complicated by the crisis in Ukraine.

Global economic optimism has been in a fragile state for the past two years. The last thing it needed was another jolt to confidence from the recent sharp rise in energy prices, soaring geopolitical risks and the threat of another sharp downturn in global trade flows.

The latest batch of global purchasing managers indices (PMIs) for manufacturing are starting to show new signs of stress. There is probably worse to follow, especially if there is no let-up in the Ukraine conflict.

As the epicentre of global manufacturing, China is already beginning to feel headwinds buffeting the economy. The big question is whether Beijing needs to amend its growth target of around 5.5 per cent for this year or commit to bigger economic stimulus instead.

It is early days, but business confidence is starting to falter. There is not only the fallout from the Ukraine crisis but also China’s new wave of Covid-19 flare-ups, which have sparked concerns about further disruption to domestic growth.

The measures of manufacturing PMI from the National Bureau of Statistics and Caixin S&P Global are showing signs of duress. Their headline gauges have fallen below the critical 50 boom-bust threshold, pushing business activity into contractionary territory again.

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.css-1m2rp1p{color:#34b8b5;}Macroscope | China’s economy cannot afford a new setback amid the Ukraine war and pandemic

Macroscope | China’s economy cannot afford a new setback amid the Ukraine war and pandemic