BEIJING, CHINA - MAY 12: People line up outside a supermarket to buy food after a rumour of an impending COVID-19 lockdown that was denied by officials was posted to social media on May 12, 2022 in Beijing, China. China is trying to contain a spike in coronavirus cases in the capital Beijing after hundreds of people tested positive for the virus in recent weeks, causing local authorities to initiate mass testing, mandate proof of a negative PCR test within 48 hours to enter many public spaces, to close schools and retail stores, ban gatherings and inside dining in all restaurants, and to lockdown many neighbourhoods in an effort to maintain the country's zero COVID strategy. (Photo by Kevin Frayer/Getty Images)
Chinese officials urge government action to revive Covid-battered economy
02:57 - Source: CNN
Hong Kong CNN Business  — 

China’s huge manufacturing and service industries just saw their first month of growth since February, according to surveys published Thursday, as Covid restrictions were eased in many cities.

But the shadow of further lockdowns still looms over the world’s second biggest economy as Beijing sends mixed messages about the best way out of the Covid pandemic.

The Chinese government’s purchasing managers’ index (PMI) for manufacturing — which mainly covers larger businesses and state-owned companies — rose to 50.2 in June, the first time it has crossed the 50 mark since February, according to the National Bureau of Statistics. A reading above 50 indicates that activity is increasing.

Meanwhile, the official non-manufacturing PMI, which includes construction and services industries, jumped to 54.7 in June, compared with 47.8 in May. It was also the first time the index has moved back into expansion territory in four months, and its strongest reading since May 2021.

The surveys provide the latest signs of recovery in China’s economy, as the country gradually reopens for business following months of widespread Covid lockdowns.

“The official PMIs point to a surprisingly rapid recovery in services activity this month after virus restrictions were mostly lifted,” said Julian Evans-Pritchard, senior China economist for Capital Economics.

But he also pointed to continued weakness in the labor market, warning that it means household finances and consumer confidence remain fragile.

“Once the reopening boost fades, this will weigh on any further recovery,” he added in a research note.

Many cities — including mainland China’s business hub Shanghai — had been under strict Covid restrictions since March, resulting in a sharp contraction in economic activity. People were confined to their homes, shops and restaurants were shut, and factories were closed. Analysts worry that the Chinese economy will contract in the second quarter, putting the government’s annual growth target of 5.5% for 2022 out of reach.

Signs of an economic slowdown and soaring unemployment have rattled top government officials, who have moved to loosen Covid restrictions and boost confidence.

Workers assemble speakers at an electronics factory in Linquan, Anhui province.

Premier Li Keqiang — No. 2 in the hierarchy of China’s Communist Party has repeatedly sounded the alarm on rising unemployment in recent months and urged the government to take stronger steps to support business and stabilize growth.

On Monday, Li