Factory activity, services in China hit multi-year high

CHINA’S factory activity expanded at the fastest pace in more than three years in November, while growth in the services sector also hit a multi-year high, as the country’s economic recovery from the coronavirus pandemic stepped up.

Upbeat data released yesterday suggests the world’s second-largest economy is on track to become the first to completely shake off the drag from widespread industry shutdowns, with recent production data showing manufacturing now at pre-pandemic levels.

China’s official manufacturing Purchasing Manager’s Index rose to 52.1 in November from 51.4 in October, data from the National Bureau of Statistics showed. It was the highest PMI reading since September 2017 and remained above the 50-point mark that separates growth from contraction on a monthly basis.

Commenting on the betterthan- expected data, NBS senior statistician Zhao Qinghe said the improvements in these readings were a result of the country’s efforts to coordinate epidemic control and social and economic development. The “marked growth” of the November PMI, together with improvements in all sub-indexes, indicated greater vitality in the country’s manufacturing sector and a faster pace of recovery, Zhao said.

Also helping activity in November were strong e-commerce shopping promotions, which unleashed solid consumer demand and bolstered confidence for small and medium-sized firms.

The sub-index for production stood at 54.7 in November, up 0.8 points from October, while that for new orders gained 1.1 points to 53.9, signaling that the revival of market demand has accelerated.

Medicine, electronic equipment and other high-tech manufacturing-related industries logged busier factory activities, with their sub-indexes of production and new orders all standing above 56, according to Zhao.

The higher manufacturing PMI in November from October was broadly based across firms of various sizes, with the manufacturing PMI for large, medium-sized enterprises and small enterprises rising to 53, 52, and 50.1 respectively, from 52.6, 50.6 and 49.4 over the same period, supported by a broader economic recovery from the pandemic.

The new export orders and import sub-indexes climbed to 51.5 and 50.9 in November, up 0.5 points and 0.1 points, respectively, from the previous month.

Uneven recovery

Both new export orders and import sub-indexes hit a year-high in November and stayed in the expansion territory for three consecutive months, pointing to a continued revival of the country’s foreign trade, according to Zhao.

But a surging yuan and further lockdowns in many of its key trading partners could pressure Chinese exports. “Some firms have flagged that as the yuan continues to rise, corporate profits are under pressure and export orders are declining,” said Zhao.

He added the recovery across the manufacturing industry remained uneven. For example, the PMI for the textile industry has stayed below the 50-point threshold, pointing to weak business activity.

In the services sector, activity expanded for the ninth straight month. The non-manufacturing Purchasing Managers’ Index rose to 56.4, the fastest since June 2012 and up from 56.2 in October, as consumer confidence gathered pace amid few COVID-19 infections.

Railway and air transportation, telecommunication and satellite transmission services and the financial industry were among the best performing sectors in November.

“The rise in November manufacturing PMI, with broad-based improvements across the subindices, suggest the recovery momentum in the industrial sector has become more certain,” Zhang Liqun, an analyst at China Federation of Logistics & Purchasing.

“The results also showed inadequate demand is still a common issue facing firms. We need to consolidate the policy support aimed to expand domestic demand.”

The robust headline PMI points to solid fourth- quarter growth, which analysts at Nomura expect to quicken to 5.7 percent year on year, from 4.9 percent in the third quarter, an impressive turnaround from the deep contraction earlier this year.

Monday’s data also showed the labor market is still facing strains. The employment index gained 0.2 points to 49.5.