China’s economy facing increasing pressure as semiconductor, coal, power shortages weigh heavy

China’s official non-manufacturing purchasing managers’ index (PMI) fell to 53.5 in June from 55.2 in May

China’s official manufacturing purchasing managers’ index (PMI) fell to 50.9 in June from 51.0 in May

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China’s official manufacturing purchasing managers’ index (PMI) fell to 50.9 in June from 51.0 in May. Photo: AFP

Published: 9:31am, 30 Jun 2021Updated: 11:17pm, 30 Jun 2021

Increased downwards pressure is expected to descend on China’s economy in the second half of the year, economists said, after leading indicators pointed towards an overall softening of business activity.

China’s official manufacturing purchasing managers’ index (PMI) eased for the third straight month to 50.9 in June from 51.0 in May, while the non-manufacturing reading dropped to 53.5 from 55.2, according to the National Bureau of Statistics (NBS) on Wednesday.

Both readings hit four-month lows, attributed to a shortage of semiconductors, coal and power and a coronavirus outbreak in the major export province of Guangdong.

“We expect downward pressure on growth to increase in the second half [of the year], especially in the fourth quarter of 2021,” Lu Ting, chief China economist at Nomura, said on Wednesday.

“As pent-up demand fades, exports weaken as developed markets shift back to services consumption as they reopen, property-related tightening measures finally bite and surging raw materials prices suppress real demand.”

Exports played a crucial role in driving growth in the coronavirus pandemic-ravaged 2020. However, the new export orders subindex within the manufacturing sector dropped for the third consecutive month to 48.1 in June.