China’s Economy Under Pressure

China’s services sector suffered an unexpectedly severe blow in August as a wave of Covid-19 infections spurred new lockdowns, sending an official gauge of nonmanufacturing activity into contractionary territory. 

China’s services sector suffered an unexpectedly severe blow in August as a wave of coronavirus infections sparked new lockdowns across the country, sending an official gauge of nonmanufacturing activity into contractionary territory for the first time since the country’s pandemic recovery began more than a year ago. 

China’s official nonmanufacturing purchasing managers index, which tracks activity in the construction and services sectors, plummeted to 47.5 in August, from 53.3 the prior month, according to data released Tuesday by the National Bureau of Statistics, breaking through the 50 mark that separates expansion from contraction. 

The manufacturing PMI showed demand slipped sharply, with new orders contracting and a gauge for new export orders falling to 46.7, the lowest in over a year. Factories also laid-off workers, at the same pace as July. 

While most of the weakness should reverse with relaxing COVID-19 restrictions, tight credit conditions and weakening foreign demand will continue to weigh on China’s economy.

The CNYUSD is this morning trading at 0.1548 ¥ (+0.0647%) and CNYEUR is at 0.1308 ¥ (-0.1603%) at 10.00 GMT+3. 

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