Explainer | From jobs to the yuan and beyond: 4 things to look out for in China’s economy in June

China has been enduring a mixed recovery, and May’s data that will be released in June will give further insight into the state of the world’s second-largest economy
The economic data has played a part in the yuan weakening against the US dollar, though it's not all bad news, with relations improving in the Middle East and Australia

China's economic recovery

Andrew Mullen

Published: 11:00pm, 1 Jun 2023

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May saw the first commercial flight of China’s C919 narrow-body passenger jet, record-high youth unemployment, meetings between Chinese and Australia trade ministers, and Hainan preparing for its first durian harvest this year.

With the month behind us, what’s in store for China’s economy in June?

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1. Is China’s economic growth heating up or losing momentum?

Purchasing managers’ indices offer the first glimpse of the state of China’s economy, and the official gauge for May released at the end of last month pointed to what analysts called a “downward spiral” for the manufacturing sector.

The official manufacturing purchasing managers’ index (PMI) fell to 48.8 in May, down from 49.2 in April, reaching the lowest level since dropping to 47 in December.

Analysts pointed to weak demand as “the culprit” for factory activity contracting further in May, and after the same factor dragged down China’s trade figures in April, the release of May’s trade data in mid-June could raise additional concerns.

Beijing has pledged to shore up trade to support the overall economic recovery, and while China’s exports rose by 8.5 per cent in April compared with a year earlier, they grew at a slower pace.

China’s slow economic recovery has already been reflected in rising youth unemployment, as well as disappointing retail sales and industrial production, prompting international investment banks to cut their full-year economic growth estimates.

Amid deflation concerns after China’s consumer price index rose by 0.1 per cent in April, year on year, data on May’s trade and inflation will be released in the second week of June, ahead of figures concerning retail sales, industrial production and unemployment a week later.

2. Weaker or stronger yuan?

The downbeat economic data has played a part in China’s yuan weakening beyond 7.0 per US dollar, ending May at the softest point in six months.

The US Federal Reserve will meet to discuss its next potential interest-rate increase in June, while the saga of the US debt-ceiling crisis is ongoing despite the US House of Representatives on Wednesday passing a bill to suspend the country’s debt ceiling and set federal spending limits.

3. Gloomy job outlook?

Youth unemployment has become one of Beijing’s biggest economic headaches amid its recovery efforts, and in April, 20.4 per cent of China’s 16-24 age group were unemployed, up from 19.6 per cent in March.

The overall urban surveyed jobless rate has remained relatively steady recently and stood at 5.2 per cent in April, down from 5.3 per cent in March, with Beijing having set a target of creating 12 million jobs this year.

Despite record-high unemployment, young Chinese are not afraid to speak out

But as graduation season approaches, provincial governments are under more pressure to address the problems faced by students.

May’s data will be released in mid-June.

4. China’s repair job?

Beijing has been on a charm offensive to woo overseas investment and attract more foreign capital to boost its economy, but then it also tightened up its national security scrutiny in recent months by probing foreign consulting companies.

This did little to calm the nerves of foreign investors who remain concerned about policy uncertainties that have long undermined the attractiveness of the Chinese market.

China has made rapid progress in repairing its relationship with Australia, as trade bans and tariffs are being rolled back, coupled with a series of high-profile meetings.

China, Australia to ‘step up’ trade talks, minister Farrell says after meeting

The Post has reported that Chinese foreign minister Qin Gang will visit Australia in July, while Australian trade minister Don Farrell said on Thursday that China’s review of its anti-dumping duties on Australian barley was “going in the right direction”.

China is also moving closer to the Middle East, with improved political and economic ties.

But relations with the United States remain strained after China’s recent move to prohibit its key infrastructure operators from buying products made by US memory chip maker Micron Technology.

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