China Update: Shanghai reopening and May PMI data bouncing off lows China Update: Shanghai reopening and May PMI data bouncing off lows China Update: Shanghai reopening and May PMI data bouncing off lows

China Update: Shanghai reopening and May PMI data bouncing off lows

Macro 5 minutes to read
Redmond-400x400
Redmond Wong

Chief China Strategist

Summary:  The situation of COVID-19 outbreaks and related lockdowns have been improving in China. Shanghai is scheduled to orderly reopen from June 1. With the reduction in the number of cities being under strict pandemic control and relaxation of lockdown measures, May PMIs have bounced off from their April lows and shown some early signs of potential recovery.


COVID-19 outbreaks are waning and lockdowns are gradually being lifted. At the highpoint of almost 30,000 cases back in mid-April, it was estimated that 360 million people (25% of China’s population) in 44 cities (accounted for about 38% of national GDP) were under some sorts of lockdown in China.  The situation has been improving with daily new local cases having fallen to 97 cases as of May 30 (Figure 1).  The number of cities under lockdowns or some kind of mobility restriction came down to 16 cities (accounted for about 10% of China’s population and 14% of national GDP) towards the end of May.  On May 30, only six provinces (Jilin, Sichuan, Yunnan, Henan, Guangdong and Jiangsu) and three municipalities (Shanghai, Beijing and Tianjin) still recorded new locally transmitted cases.  After Shanghai coming out of full lockdown from June 1, there will be no city being under full lockdown and the 15 remaining will be under partial lockdown or district-based mobility restriction and pandemic control. 

Shanghai will start lifting the lockdown on June 1, except for high/medium risk areas. The opening includes orderly resumption of public transport as well as private vehicle transport and allowing movements in and out of residential compounds.  Factories will be allowed to resume production and economic activities will gradually resume towards normal.  Residents are required to show negative results from nucleic acid (PCR) tests conducted within the preceding 72 hours in order to get into many public venues and to use public transport. 

While remaining in contractionary zones, May PMI data bounced off their April lows. Official manufacturing PMI came at 49.6 in May, beating street consensus (Bloomberg survey 49) and bouncing 2.2 points from April’s 47.4.  Non-manufacturing PMI rose to 47.8 in May, well exceeding the 45.5 expected by economists and the 41.9 print in April.  The rate of contraction in economic activities has slowed as less cities being under lockdown or district-based mobility restriction and pandemic control. 

Production rose to 49.7 from 44.4.  New orders increased to 48.2 from 42.6.  New export order recovered to 46.2 from 41.6.  Economic activities represented by these key sub-indices were still contracting in May but were much less so than in April.  Large enterprises led the recovery in manufacturing PMI and was back to expansionary zone with a 51.0 print.  Among non-manufacturing activities, the construction sub-index moderated to 52.2 in May from 52.7 in April while the services sub-index bounced to 47.1 from 40.0.

Caixin manufacturing PMI is scheduled to release on June 1.  Bloomberg survey is calling for 49 (vs 46 in April).

If the trend of improvement in COVID-19 outbreaks and relaxation of lockdown continues, it is likely that PMI data will improve further in June. 

COVID U Index China Local Covi 20220531 204330
Figure 1: China Daily New Local Cases; Source: Bloomberg LP; Saxo

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • 350x200 peter

    Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • 350x200 althea

    Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • 350x200 peter

    Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • 350x200 charu (1)

    FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • 350x200 ole

    Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.