China factory activity rebounds in June: Caixin

[BEIJING] China's manufacturing activity rebounded last month as new orders and production gathered pace, independent figures showed on Monday, but an analyst warned the pick up was likely to be temporary.

The indicator tallies with the government's purchasing managers' index (PMI) that also showed an improvement in factory conditions in June compared with the previous month.

But there are growing concerns that the world's second-largest economy is losing momentum as policymakers rein in lending and curb property purchases after years of debt-fuelled investment.

The private Caixin survey of purchasing managers at hundreds of manufacturing companies showed a reading of 50.4 last month, compared with 49.6 in May.

A PMI figure above 50 indicates growth while anything below points to contraction. May's data showed the first contraction in almost a year.

New orders expanded at the fastest pace in three months, boosting production and helping lift the PMI, Caixin said in a joint statement with data compiler IHS Markit.

But relatively subdued customer demand weighed on business confidence, which fell to the lowest level this year.

"The manufacturing sector recovered slightly in June, but based on the inventory trends and confidence around future output, the June reading was more like a temporary rebound, with an economic downtrend likely to be confirmed later," said Zhengsheng Zhong, director of macroeconomic analysis at research firm CEBM Group, which is part of Caixin.

Manufacturers seeking to cut costs and improve efficiency further reduced staff numbers in June, straining their operating capacity and leading to an increase in work backlogs, the survey showed.

Beijing is wrestling with huge debt and excess capacity left over from massive government-backed infrastructure spending at the height of the global financial crisis, which has led to a slowdown in economic growth.

AFP