December 1, 2020

China factory activity growth hits decade high in November

By ellen

Analysts expect China's economy to grow about 2 per cent in 2020, the weakest since 1976 but still far stronger than other major economies.

BEIJING (REUTERS) – Activity in China’s factory sector accelerated at the fastest pace in a decade in November, a business survey showed on Tuesday (Dec 1), as the world’s second-largest economy recovers to pre-pandemic levels.

The Caixin/Markit Manufacturing Purchasing Managers’ Index(PMI) rose to 54.9 from October’s 53.6, with the gauge staying well above the 50-level that separates growth from contraction for the seventh consecutive month.

Analysts polled by Reuters had forecast the headline reading would slip to 53.5.

Since Covid-19 paralysed huge swathes of the economy early this year, China has seen a strong rebound in activity, helped by strict virus containment measures, infrastructure-driven stimulus, strong exports of medical supplies, and pent-up demand.

Surging infections and fresh lockdowns in some of its key trading partners could dent demand for Chinese exports, which have been surprisingly resilient so far.

The Caixin PMI reading was the highest since November 2010, and comes after an official gauge of factory activity, focusing more on larger and state-owned firms, rose at the fastest pace in over three years.

E-commerce shopping promotions in November showed strong consumer demand, bolstering confidence for small and medium-sized firms.

Economic indicators ranging from trade to producer prices all suggest a further pick up in the industrial sector.

“Manufacturing continued to recover and the economy increasingly returned to normality as fallout from the domestic Covid-19 epidemic faded,” Wang Zhe, senior economist at Caixin Insight Group, wrote in a note accompanying the survey release.

Gauges of both total new orders and factory output marked 10-year highs. New export orders rose more modestly. The private sector survey also showed Chinese factories hired workers for the third month in a row and at a faster pace. “Supply and demand improved at the same time. Employment recovered markedly and overseas demand kept expanding,” said Wang.

Input and output prices both rose, with respondents to the survey citing a sharp rise in the cost of raw materials, especially metals, he said.

Analysts expect China’s economy to grow about 2 per cent in 2020, the weakest since 1976 but still far stronger than other major economies.

“We expect the economic recovery in the post-epidemic era to continue for several months. At the same time, deciding how to gradually withdraw the easing policies launched during the epidemic will require careful planning as uncertainties still exist inside and outside China,” said Mr Wang.