China's Growth Jolt Masks Deeper Economic Threat

2025-07-01 03:12:20

(MENAFN- Asia Times) China's economy is flashing mixed signals again – just when clarity is needed most. June's factory and construction data came in stronger than expected, with the manufacturing purchasing managers' index (PMI) rising to 49.7 from 49.5.

This small but symbolic improvement suggests momentum in parts of the economy. But beneath the surface, the warning signs are impossible to ignore. Deflation remains entrenched, job creation is weakening and doubts are mounting over whether Beijing will – or even can – deliver the stimulus that markets have been betting on.

The data, released Monday, gave markets a brief shot of optimism. Construction and services activity accelerated, adding to the sense that policy support measures announced earlier this year may be gaining limited traction.

Export orders rebounded, helped along by the 90-day tariff truce with the US that began in April. Traders hunting for any sign of stabilization seized on the numbers. For a few hours, bond yields rose and equity markets bounced.

But the relief faded almost as quickly as it arrived.

Within the details of the PMI reports were signals that the broader economy remains under serious strain. Factory output may have ticked up, but new domestic orders remain soft. Price indicators continue to show persistent disinflation, with producer prices now falling for the 21st consecutive month.

Consumer inflation is hovering near zero, heightening fears that China could soon slip into a more damaging deflationary cycle.

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