China’s economic growth may have ‘peaked’, will ‘wane’ for rest of 2021 after April sentiment slowdown

China’s official manufacturing and non-manufacturing purchasing managers’ indices (PMI) dropped in April, but continued to show growth in the economy

Some analysts said China’s economy has peaked after a record year-on-year growth rate of 18.3 per cent in the first three months of 2021 and will slow gradually for the rest of the year

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China’s non-manufacturing purchasing managers’ index (PMI) – a gauge of sentiment in the service and construction sectors – fell to 54.9 in April from 56.3 in March. Photo: EPA-EFE

Published: 9:07am, 30 Apr 2021Updated: 5:02pm, 30 Apr 2021

The “peak” of China’s economic growth has already passed or will soon do so and momentum will only “wane” further for the remainder of the year, analysts said, after slowing domestic and overseas demand led to lower-than-expected sentiment in the manufacturing and non-manufacturing sectors in April.

The results of the official purchasing managers’ indices (PMI) released on Friday indicated a modest cooling economic activity in the first month of the second quarter following on from a record year-on-year growth rate of 18.3 per cent in the first three months of 2021.

The official manufacturing PMI – a survey of sentiment among factory owners – fell to 51.1 in April from 51.9 in March, the National Bureau of Statistics (NBS) announced on Friday. The result was below expected.

A reading above 50 indicating growth in sector activity, while a reading below the mark represents contraction. The higher the reading above 50, the faster the pace of expansion.

Activity is still robust and is likely to remain so in the near-term, but sequential growth will probably continue to cool

Julian Evans-Pritchard

April’s Caixin/Markit manufacturing PMI – which largely measures sentiment among smaller, mostly private firms – rose from an 11-month low of 50.6 in March to 51.9 in April. This signalled the strongest sector activity since December 2020, albeit one that was modest overall.

The official non-manufacturing PMI – which measures morale in the services and construction sectors – fell to 54.9 in April from 56.3 in March. The reading was also below expected.

“The latest surveys suggest that growth edged down this month. Supply-side disruptions appear mostly to blame for a slower rise in manufacturing output. But there are also signs of a demand-led slowdown in construction and services. Activity is still robust and is likely to remain so in the near-term, but sequential growth will probably continue to cool,” said Julian Evans-Pritchard, senior China economist at Capital Economics.