According to data released by the China Federation of Logistics and Purchasing, China’s Manufacturing PMI stood at 50.1, signaling an expansion of the sector but still lower than expectations of 50.2. The figure was also below the previous month's 50.4.
The Non-Manufacturing PMI signaled a contraction of the services sector, standing at 47.5 in August as the biggest contraction since early 2020. The figure was below expectations of an expansion to 52.8. It was also below the previous month's reported figure, which stood at 53.3.
These data confirm the deceleration of Chinese economic growth and are mostly being linked to the spread of the Delta variant of the COVID-19 virus, which pushed Beijing and other major Chinese cities to impose restrictions.
“The worse-than-expected August PMIs add conviction to our view that the growth slowdown in H2 could be quite notable,” commented analysts at Nomura. “We expect Beijing to maintain its policy combination of ‘targeted tightening’ for a few sectors, especially the property sector and high-polluting industries, complemented by ‘universal easing’ for the rest of the economy.”
China continues struggling with the spread of the Delta strain of the COVID-19 virus, which is believed to be more transmissible than other variants.
Since the beginning of the pandemic, 94,879 COVID-19 cases have been reported in China, including 4,636 related deaths. Around 2040 vaccine dosages have been distributed among the local population while 889 million people are now fully vaccinated. This puts China on par with the United Kingdom, which currently leads developed countries in terms of the number of inoculations, surpassing the United States.
According to analysts, China's regulatory measures are also putting economic recovery at risk, especially if demand for certain products such as steel exceeds supply. The country is looking to become carbon neutral by 2060, concretely achieving net-zero emissions, which has pushed the government to restrict activity in certain sectors, among them the steel sector, which produces about 15% of the total emissions.
Since the beginning of the week, the Chinese yuan has gained 0.17% against the US dollar, gaining ground for the second consecutive week and closing Monday's session at the 0.1546 level. By 10:09 GMT, the Chinese yuan rose by 0.09% against the US dollar, hitting the 0.1548 level.