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Chinese factories to face headwinds in next phase of post-lockdown recovery

Prices of copper and steel have surged and share prices for Chinese blue chips struck five-year highs, as state-funded infrastructure projects drove up production of cement, steel and non-ferrous metals.

Railway investment, for example, soared 11.4% in April-June from a year earlier versus a 21% drop in the first quarter.

Industries also gained from pent-up demand for autos and electronics. The property sector, a pillar of growth, also showed signs of rebounding, with real estate investment expanding and sales quickening.

The industrial recovery is expected to help China’s economy post a positive growth rate in the second quarter after contracting for the first time in decades due to COVID-19.

But analysts warn that factories could struggle to keep up momentum even as early as this quarter as pent-up demand wanes, exports struggle and heavy floods take their toll on industries and businesses in the Yangtze Delta.

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