Widening Temperature Gap in China's Economic Indicators... Booming Services Sector vs. Sluggish Manufacturing

Surge in Travel Demand During Labor Day Holiday
Tourism Revenue Estimated at 23 Trillion Won... Liquidity Eases
Manufacturing Contracts After 4 Months... Weak Performance Continues

In China, the economic recovery imbalance between the service sector and the manufacturing sector is growing. During the Labor Day holiday (April 29 to May 3), travelers across the country are expected to generate the largest-ever scale of liquidity, but the manufacturing sector, a key industry, is falling short of expectations due to sluggish global demand.

According to China Central (CC) TV on the 1st, the number of road and railway passengers on the first and second days of the Labor Day holiday reached 58.27 million, and air passengers totaled 52.31 million. The combined number of travelers exceeded 110 million. This figure is about 20% higher compared to the Labor Day holiday period in 2019, before the spread of COVID-19.

[Image source=AP Yonhap News]

The state-run media Global Times (GT), citing industry estimates, reported that the total number of tourists during this holiday period will exceed 240 million, which is a 104% increase compared to 2019. Related tourism revenue is expected to reach approximately 120 billion yuan (about 23.1528 trillion won), which is 83% of what was earned throughout 2019.

Based on low interest rates, relaxed lending policies, and sufficient excess savings, the real estate market has also recently shown signs of recovery. Last month, the new home sales volume of the top 100 real estate developers rose 31.6% compared to the previous month, surpassing the increase in March (29.2%).

On the other hand, China’s manufacturing sector has returned to a 'contraction' phase after four months, showing a sluggish trend. According to the National Bureau of Statistics of China’s announcement on the 30th of last month, China’s Manufacturing Purchasing Managers’ Index (PMI) for April was 49.2, down 2.7 points from the previous month, falling below the baseline (50). This index, surveyed from 3,200 manufacturers in China, is calculated based on new orders, production, number of employees, and other factors. A reading below 50 indicates contraction, while above 50 indicates expansion. This is the first time since the end of last year, when China abruptly shifted to a "with-COVID" policy, that the index has fallen below the baseline.

Other leading indicators also slipped. The new orders index dropped 4.8 points in one month to 48.8. The production index and employment index also worsened, recording 50.2 and 48.8 respectively, compared to the previous month. New export orders also fell 2.8 points month-on-month to 47.6.

Concerns about this situation are also emerging within China. Zhong Zhengcheng, an economist at Ping An Securities, said, "Without a rebound in global manufacturing, it would not be appropriate to have high expectations for the growth of China’s manufacturing sector." Guotai Junan Securities also stated in a recent economic report that "the economic recovery is uneven," adding, "China’s recovery has somewhat lost momentum, which suggests the need for continuous policy support."

This content was produced with the assistance of AI translation services.