China Tech, Small-Business Gauges Show Economy Improving in July

Sentiment in China’s tech sector and among smaller firms improved this month, suggesting that the recovery in the second-quarter continued in July.

A gauge of the outlook for small and medium-sized companies rose to 53.9 in July, according to Standard Chartered Plc., which surveys hundreds of such firms in China each month. The index for output strengthened, and export orders started expanding again.

China Tech, Small-Business Gauges Show Economy Improving in July

“Manufacturing continued to outperform services, leading the overall recovery,” but activity in the services sector started to catch up in June-July, according to Standard Chartered economists Shen Lan and Ding Shuang, who compile the survey. “In particular, industries that were hit hard by the virus outbreak, such as transport, real estate, catering and accommodation, showed stronger momentum than others on pent-up demand.”

The stronger results will be good news for the government, which has been trying to stabilize the economy and boost growth without resorting to massive stimulus. However, while the manufacturing sector and the supply side of the economy has been stronger, private and consumer demand still shrank in the first half of the year.

A separate gauge which tracks the tech sector also improved in July, according to a report from Nomura Holdings Inc. Chief China Economist Lu Ting. However, export demand is still weak and there is severe flooding in central China, which will weigh on the economy.

The official PMI will be unchanged in July from June, and growth will slow in the second half of the year, Lu wrote.

©2020 Bloomberg L.P.

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