Economic misery and tech controversy plague China

Factory activity tanks as slump continues amid allegations about a new advanced Chinese chip

China’s economy suffered a double whammy as factory activity went into freefall in May.

The news came off the back of allegations that Chinese tech firm Powerleader ripped off Intel for its Powerstar “homegrown” processor. Both companies have yet to comment on the issue.

As for the numbers, the official manufacturing PMI plunged to a five-month low. In May, it dipped to 48.8 from 49.2 in April, the National Bureau of Statistics reported. That was below the 50-point mark that separates expansion from contraction.

“The problem with the Chinese economy is clearly weak domestic demand, and yet it seems that the only response Beijing can come up with is more supply-side support,” economist Michael Pettis, of the Carnegie Endowment for International Peace, tweeted.

“This will boost the economy mainly by boosting the country’s trade surplus,” he said.

Caught in a trap:

  • Grindingly slow expansion in the service sector, which dropped to 53.8 in May, is another critical challenge.
  • This will hit the jobs market with unemployment among those aged between 16 to 24 at a record high of 20.4%.
  • Eye-watering government debt of US$23 trillion has only added to the toxic mix.

Geekbench found the chips identical to Intel’s Core i3-10105 Comet Lake CPU.

South China Morning Post

Between the lines: “Sluggish domestic demand could weigh on China’s sustainable growth if there is no efficient and effective policy moves to engineer a broad-based recovery,” Bruce Pang, the chief economist at Jones Lang LaSalle, said as reported by Reuters news agency.

Big picture: Chairman of Everything Xi Jinping has ordered the ruling Communist Party to pursue a new economic policy based on “common prosperity” and advanced manufacturing.

Delve deeper: But that vision has been blurred by the high-tech war between China and the United States, and Washington’s freeze on state-of-the-art semiconductor sales.

Chip and pinned: The fallout continued after the South China Morning Post reported that Powerleader’s Powerstar chip looked “identical” to an Intel central processing unit.

What was said: “Geekbench, a platform run by Canadian software developer Primate Labs, published parameters of Powerstar P3-01105 CPU [or central processing unit] on May 26 and found the chips identical to Intel’s Core i3-10105 Comet Lake CPU,” the SCMP pointed out.

China Factor comment: The bad news keeps coming. First, with an economy mired in trouble and now claims about Powerleader. So much for Xi’s high-tech economic dream.