2024-04-01 22:02:33
Factory activity in China increased for the first time in 6 months in a positive sign for Beijing, as the world’s second largest economy suffers from a severe slowdown in the real estate sector and weak investor confidence.
The National Bureau of Statistics announced that the manufacturing purchasing managers index reached 50.8 points in March, up from 49.1 in February, the highest in a year thanks to an increase in export orders. Numbers above 50 indicate growth compared to the previous month.
However, the National Bureau of Statistics warned of the need for the state to provide additional support to industry, at a time when companies are suffering from weak market demand, confirming the concerns of China’s trading partners that excess industrial capacity might spill over into export markets.
Zhao Qinghe, chief statistician with the National Bureau of Statistics, said that during March, as companies rushed to resume work and production following the Spring Festival, market activity increased, referring to the week-long Lunar New Year holiday in February.
The Chinese economy has shown signs of stabilization in recent weeks following sending mixed signals last year, with Beijing announcing 5.2% growth in gross domestic product despite a decline in export revenues and real estate sales.
The Communist Party set a growth target of 5% for 2024, the same rate as last year, during the Chinese parliament meeting this month. Analysts believe that the goal is ambitious and requires more support and incentives.
But industry profits during the January-February period reached their highest level in 25 months, according to data released on Wednesday. Economists interpret this as a sign that the industrial sector has reached its lowest levels and is starting to improve.
Tao Wang, chief China economist at UBS, believes that the PMI numbers show a recovery in export orders, while domestic activity recovered during the latter part of March.
She said that most of the PMI sub-indices witnessed improvement, with the exception of factory delivery prices, which indicates that demand for consumer goods may remain relatively weak. She added that the employment sub-index showed only slight improvement.
During this week, Citibank decided to raise its full-year estimate for GDP growth in 2024 to 5% from 4.6%, citing recent data and the strong policy response from the government.
In addition to higher industry profits, the bank said that exports exceeded expectations, services activity rose during the Lunar New Year holiday, and capital spending and investment in infrastructure were strong.
During March, the non-manufacturing PMI, which includes services and construction, reached 53 points, up from 51.4 in February, the highest since the middle of last year.
Signs of stability appeared following Chinese President Xi Jinping sought to send a strong message to foreign investors by meeting with American CEOs in Beijing on Wednesday.
In its PMI statement issued on Sunday, the National Bureau of Statistics said the indices for new export orders and imports reached 51.3 and 50.4 respectively, an increase of five points and four points from the previous month.
He stressed that the increase was driven by exports of chemical fibres, rubber and plastic products, in addition to cars, computer equipment and communications devices.
He added that the results of the Purchasing Managers’ Index reflect the intense industrial competition and the suffering of a large percentage of companies from weak market demand.
He explained that policies to boost domestic consumption through large-scale equipment upgrades and consumer goods trade require further detailing and implementation to provide strong support to manufacturers.
In a research note this week, ING said that a continued recovery in the manufacturing sector would help Beijing achieve its goal of reaching the 2024 growth target, but more supportive policies are still needed to maintain momentum and recovery.
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