Factory workers are seen on an assembly line at a manufacturing plant for automobile air conditioners in China. File
| Photo Credit: AP

Manufacturing in China expanded in March after contracting for five consecutive months, according to an official survey of factory managers released on March 31, suggesting a rebound in industrial activities following the Lunar New Year holiday.

The official purchasing managers index, or PMI, rose from 49.1 in February to 50.8 in March. The PMI is on a scale of 100, where 50 marks the cutoff between expansion and contraction.

The monthly manufacturing PMI has mostly been under 50 over the past 12 months: Other than this month, factory activities only recorded an expansion in September.

China’s National Bureau of Statistics senior statistician Zhao Qinghe said the market became more active as companies resumed and sped up production after the Lunar New Year holiday. Many factories stopped running during the holiday, with social media posts suggesting workers at some companies were off for as many as 140 days starting in late 2023 due to the lack of new orders.

Mr. Zhao said the survey also showed some problems for companies remained, including increasing competition in industries and a lack of market demand.

During the annual session of the National People’s Congress in March, China said it would encourage consumers to scrap old appliances and trade in their cars for electric vehicles to help spur domestic demand. And it said 10.4 billion yuan ($1.4 billion) would go to upgrading industries and modernising manufacturing.

Mr. Zhao said the policies promoting the trade-ins of consumer goods and large-scale equipment upgrades still needed further implementation to support the high-quality development of the manufacturing industry.

According to the survey released on March 31, the non-manufacturing PMI rose to 53 from 51.4 in February. The reading is the highest since June 2023.

The recovery of the world’s second-largest economy following the shocks of the Covid-19 pandemic faced many obstacles, one of the largest being a downturn in the real estate industry after authorities moved to curb excess borrowing by property developers.

The ruling Communist Party’s target is to grow the economy by about 5% this year, an ambition that economists say may be hard to attain.

China’s factory activity expanded for the first time in six months in September, an official survey showed on Saturday. file photo for representation
| Photo Credit: AP

China’s factory activity expanded for the first time in six months in September, an official survey showed on Saturday, adding to a run of indicators suggesting the world’s second-largest economy has begun to bottom out.

The purchasing managers’ index (PMI), based on a survey of major manufacturers, rose to 50.2 in September from 49.7, according to the National Bureau of Statistics, edging above the 50-point level demarcating contraction in activity from expansion. The reading beat a forecast of 50.0.

The PMI, the first official statistics for September, adds to signs of stabilisation in the economy, which had sagged after an initial burst of momentum early in the year when China’s ultra-restrictive COVID-19 policies were lifted.

Preliminary signs of improvement had emerged in August, with factory output and retail sales growth accelerating while declines of exports and imports narrowed and deflationary pressures eased. Profits at industrial firms posted a surprise 17.2% jump in August, reversing July’s 6.7% decline.

“The manufacturing PMI, plus the good industrial profit figures, suggest that the economy is gradually bottoming out,” said Zhou Hao, chief economist at Guotai Junan International.

China’s non-manufacturing PMI, which incorporates sub-indexes for service sector activity and construction, also rose, coming in at 51.7 versus August’s 51.0.

The composite PMI, including manufacturing and non-manufacturing activity, climbed to 52.0 in September from 51.3.

Near-term data on the radar of economists include consumer spending for the longest public holiday this year. “Golden Week” kicked off on Friday with the Mid-Autumn Festival, which will be followed by the National Day break through Oct. 6.

Passenger travel by rail on Friday reached 20 million trips, a single-day record, state media reported on Saturday, in a bullish start to what authorities had forecast to be “the most popular Golden Week in history”.

PROPERTY RISKS

More stable economic indicators will be welcomed by policymakers as they continue to grapple with a property sector debt crisis that has rattled global markets. The authorities have announced a series of measures to shore up the property market, including cutting mortgage rates, although the sector is far from being out of the woods.

New home prices fell the fastest in 10 months in August and property investment declined for an 18th straight month.

China Evergrande Group, the world’s most indebted property developer with more than $300 billion in liabilities, said on Thursday its founder was being investigated over suspected “illegal crimes”.

The Asian Development Bank last week trimmed its 2023 economic growth forecast for China to 4.9% from a July forecast of 5.0% due to the weakness in the property sector.

Analysts say more policy support will be needed to ensure China’s economy can hit the government’s growth target of about 5% this year.

“China’s economy stabilised partly driven by the loosening of property sector policies,” said Zhiwei Zhang, chief economist of Pinpoint Asset Management.

“The key issue going forward is whether fiscal policy will become more supportive. I think it will, but timing-wise the change of fiscal policy stance may happen next year instead of this year.”