BEIJING (Reuters) – China’s factory activity contracted in March as the economy faced renewed downward pressures from stringent COVID-19 controls, an official survey showed on Thursday.
The official manufacturing Purchasing Managers’ Index (PMI) fell to 49.5 in March from 50.2 in February, the National Bureau of Statistics (NBS) said.
A Reuters poll had expected the PMI to ease to 49.9, a notch below the 50-point mark that separates contraction from growth on a monthly basis.
The world’s second-largest economy revved up in the first two months of 2022, with some key indicators blowing past expectations.
However, it is now at risk of slowing sharply as authorities restrict production and mobility in many cities, such as financial centre Shanghai and tech hub Shenzhen, under its zero-COVID policy.
Shanghai’s COVID-19 lockdown has roiled auto production in recent days as two major suppliers joined Tesla in shutting plants to comply with measures to control the spread of the coronavirus.
Chinese Premier Li Keqiang earlier this month announced a slower economic growth target of around 5.5% this year, which some analysts deemed to be ambitious, given the slump in the property market, weak consumption and new COVID-19 outbreaks.
To cushion the impact of new COVID-19 lockdowns, authorities have unveiled steps to support business, including rent exemptions for some small services sector firms.
The central bank, which kept its benchmark interest rate for corporate and household lending unchanged in March, is expected to cut rates and lower reserve requirements for banks as downward pressures build, analysts say.
Growth in the services sector faltered in March, with the official non-manufacturing PMI in March easing to 48.4 from 51.6 in February, as virus containment measures hit consumer confidence.
China’s official composite PMI, which combined manufacturing and services, stood at 48.8 in March compared with 51.2 in February.
(Reporting by Ellen Zhang, Stella Qiu and Ryan Woo; Editing by Sam Holmes)
