China factory activity dips further in May 2

BEIJING – China’s manufacturing activity shrank in May for the second successive month, official figures showed Wednesday, the latest sign that the country’s economic recovery is losing steam.

The official manufacturing purchasing managers’ index (PMI) – a key measure of factory output – fell to 48.8 this month, below the 50-point mark that separates expansion and contraction, according to the National Bureau of Statistics (NBS).

The figure followed an unexpected fall to 49.2 in April, which reversed three consecutive months of growth. It was lower than the median estimate of 49.5 in a Bloomberg survey of economists.

The drop “indicates the economic recovery faces challenges,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.

They include a cooling property market and a burgeoning second wave of Covid-19 that has weakened domestic demand, Zhang said.

But there is “no sign of imminent policy response,” he said, adding the government “may continue to take a ‘wait-and-see’ stance for now.”

China’s economy expanded 4.5 percent in the first quarter of the year as the country rapidly reopened after ditching years of strict health controls that hammered businesses and international supply chains.

But a host of other headaches are bedevilling the world’s second-largest economy, including its debt-laden property sector, limp consumer confidence and the risk of recession elsewhere.

The country is also grappling with a new COVID-19 outbreak, but official data on the scale of it is scarce and there is little sign that containment policies will be reimposed.

Senior health adviser Zhong Nanshan said the current wave may peak at around 65 million infections per week by the end of June, state-backed Shanghai media outlet The Paper reported last week.

Meanwhile, the United States on Monday criticized China for restricting sales of chips from American giant Micron, the latest move in a feud between the two powers on semiconductors.

“We have very serious concerns with the reports that the PRC has restricted the sale of Micron chips to certain domestic industries,” State Department spokesman Matthew Miller said, referring to China.

“Broadly, this action appears inconsistent with the PRC assertions that is open for business and committed to a transparent regulatory framework,” Miller told reporters.

He said that the Commerce Department was addressing US concerns with China.

Beijing’s decision on Sunday move came on the eve of a visit to Washington by Commerce Minister Wang Wentao, a rare trip by a senior official from Beijing.

China’s cybersecurity watchdog on Sunday instructed operators of “critical information infrastructure” to stop buying from Micron, one of the world’s largest chip manufacturers.

Micron’s products “have relatively serious potential network security issues, which pose a major security risk to China’s critical information infrastructure supply chain and affect China’s national security,” the cybersecurity administration said in a s’tatement.

The United States last year imposed sweeping restrictions on China’s access to high-end chips, citing national security concerns.

Washington has expressed fear that China will use US technology to develop advanced military equipment.

The Netherlands and Japan -- US allies that are both leading manufacturers of specialized semiconductor technology -- have both announced their own restrictions on exports, but without explicitly naming China.