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Focus on China — Shanghai is sourcing; Electric vehicle makers post weaker April sales; Service activity drops

BEIJING (Reuters) – Shares in Shanghai rose in a holiday-shortened week, with consumers leading the gains on Thursday after the central bank pledged support to ensure ample liquidity.

However, sentiment was weak as surveys showed China’s economic activity declined last month.

The Shanghai Composite Index closed 0.7% higher at 3,067.76 points, while the blue-chip CSI300 index fell 0.2% to 4,010.21.

Chinese EV makers post weaker April sales due to Covid disruptions

Three of China’s biggest electric car makers saw a sharp drop in sales in April after strict COVID-19 measures halted production and deliveries, dampening one of the world’s fastest-growing markets for vehicles.

Xpeng Inc., NIO Inc. and Li Auto Inc. fell 41.6%, 49% and 62% respectively in April from March, according to data released by the companies this week.

Li Auto said its manufacturing took a hit in April as 80% of its parts suppliers were in and around Shanghai, where the resurgence of COVID-19 has disrupted supply chain, logistics and production. production.

NIO said it suspended production at its Hefei plant on April 9 due to supply chain disruptions.

Xpeng fared better than rivals because its factory is in the southern province of Guangdong, where the COVID-19 situation is stable and restrictions are lighter than in Shanghai and Jilin.

But Xpeng chief executive He Xiaopeng warned last month that automakers across the country may have to suspend production if suppliers in and around Shanghai are unable to resume work.

The Chinese government said it was trying to resolve transportation issues. Shanghai authorities have compiled a list of nearly 2,000 companies, including Tesla Inc. and SAIC Motor Corp., which have priority to resume production under a so-called “closed-loop” management where workers are housed at the factory sites.

However, production at companies on the Shanghai list remains weak due to a lack of workers, said Chen Yudong, president of automotive supplier Bosch China.

Toyota Motor Corp. is due to release its April China sales data on Monday, while Tesla China sales are expected to be released next week via industry association data.

China’s services activity falls at second highest rate on record

China’s service sector activity contracted at the second-fastest rate on record in April as COVID-19 curbs brought the industry to a halt, leading to steeper reductions in new businesses and labor. employment, a private sector survey revealed on Thursday.

The Caixin Services Purchasing Managers Index came in at 36.2 in April, the second lowest since the survey began in November 2005 and down from 42 in March. The index hit a record low of 26.5 in February 2020 at the start of the pandemic.

The 50 point mark separates growth from contraction on a monthly basis.

The pessimistic results of the survey, which focuses more on small businesses in coastal regions, are in line with the government’s official PMI, highlighting the rapid deterioration of a key sector which accounts for around 60% of the economy and half of the urban jobs. .

A sub-index for new business came in at 38.4, also the second-lowest on record and down from 45.9 the previous month, as service firms signaled escalating measures to contain the spread of COVID cases weighed heavily on customer demand early in the second quarter.

Employment also fell for the fourth consecutive month in April, although the decline was marginal, compared to significant declines in activity.

Meanwhile, input costs have risen at a healthy pace, but efforts by service companies to attract more business amid sluggish demand have led to lower prices charged, highlighting growing pressures on the costs faced by service providers.

“Demand was under pressure, external demand deteriorated, supply declined, supply chains were disrupted, delivery times lengthened, backlogs increased, workers struggled. struggling to get back to work, inflationary pressures persisted, and market sentiment remained below the long-term average,” said Wang Zhe, senior economist at Caixin Insight Group.

Caixin’s April composite PMI, which includes both manufacturing and services activity, fell to 37.2 from 43.9 the previous month.

The Caixin PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in China.

(Contributed by Reuters)

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