For all the efforts to talk up a second-half rebound by China’s economy, the economic indicators fluctuate inconsistently and inconclusively between recovery and continued slowdown. The latest, HSBC’s June flash (preliminary) purchasing managers’ index (PMI), a measure of manufacturing activity primarily in export-oriented small and medium-sized companies, falls plumb in line. At 48.1, slightly down from May’s 48.4, it continues to linger just below the 50 level that separates expansion from contraction, despite the June number being a seven-month low.
Such uncertainty about the pace and duration of the gradual slowdown of growth is mirrored in the series of policy measures taken to combat it, a succession of limited–policymakers would say targeted–stimuli from consumer tax breaks to a token interest rate cut. The big guns have not been fired. Policymakers have held fast on easing curbs on the property market intended to take the speculative froth out of that particular bubble. Talk of a large stimulus package along the lines of even a scaled down version of the one introduced in the face of the global financial crisis in 2008, remains just that, even though the official PMI for June is expected to show an eighth consecutive decline. That would match the length, if not the severity, of its fall in 2008 when it hit a low of 40.9. The only question is whether, having hit 50.4 in May, it will drop below 50 or stay in expansionary territory, and thus keep policymakers confused and confounded for another month.