China’s manufacturing sector shows signs of strength

BEIJING – China’s manufacturing and service sectors showed unexpected signs of recovery to end the year, according to a pair of official gauges released on Friday, as Beijing proceeds to arrest a spiral down due to the real estate slump and the coronavirus outbreak.

China’s official manufacturing purchasing managers index rose to 50.3 in December, up from 50.1 in November, the National Bureau of Statistics said on Friday. The results were better than the 50.0 average expected by economists polled by the Wall Street Journal. It also marked the second straight month in which the manufacturing PMI remained above the 50 mark, barring an expansion and contraction.

The Bureau of Statistics attributed the increase in manufacturing sentiment to a drop in commodity prices as the government intervened to stabilize supply and prices, thereby easing cost pressures on manufacturers.

However, a sub-index of factory activity weakened to 51.4 in December, below the 52 in November, as output in the textiles, oil and coal sectors all fell below the mark. 50, according to official data.

After recovering from the previous power crisis that affected many industries in the fall, closing factories in the Yangtze River Delta earlier this month after a new wave of coronavirus infections is expected to affect year-end industrial output and China’s export figures, expected to be released in the coming weeks. next.

Even with manufacturing weakening, market demand for China’s factory output showed a slight improvement in December, with domestic orders rising slightly. Tracking the subindex, total new orders rose to 49.7 in December, higher than 49.4 in November but still in dynamic territory. However, the sub-index measuring new export orders weakened to 48.1 in December from 48.5 the previous month — the eighth straight month that the index has fallen.

Beyond the factory base, China’s service sector has posted a quiet recovery following the latest round of coronavirus control measures.

China’s official non-manufacturing PMI, which includes services and construction activity, rose to 52.7 in December, from 52.3 the previous month, the statistics bureau said exclusively on Wednesday. Six.

Subindex measurement service activity increased to 52 this month, up from 51.1 in November, as airlines, restaurants and entertainment venues began coronavirus shutdowns in November. Sub-index construction activity fell to 56.3, from November’s 59.1, as construction activity was hit by unusually cold weather.

“The improved PMIs suggest that market confidence has been boosted by recent easing moves and top leaders’ pledge to prioritize stability over the coming year. But that doesn’t mean the major economic indicators will end their declines anytime soon,” said Tang Jianwei, economist at Bank of Communications.

China began shifting its policy stance this month to bolster its economy as signs of cooling in the world’s second-largest economy began to emerge in the third quarter of the year.

As the economy was hit by a power crisis that curtailed factory production, the wave of the Covid-19 outbreak halted a recovery in consumption and a deepening market slump. real estate, People’s Bank of China earlier this month reduce its benchmark interest rate for the first time in almost two years. That move entailed a reduction in the reserve requirement ratio of commercial banks – effectively freeing up large amounts of loanable capital.

China has surpassed the US in shipping a Covid-19 vaccine around the world, but the Biden administration says it has donated more doses. The WSJ looks at how Omicron challenges both as they push for global influence. Photo: Rodrigo Sura / Esteban Biba / Shutterstock

Top leaders pledged this month to prioritize growth stability while charting next year’s economic priorities. That language has fueled market anticipation of more aggressive rate cuts and support measures in 2022, when leader Xi Jinping is expected to secure a third term in power and reshuffle other top government offices.

However, even those moves may not be enough to reverse the current downtrend, said Bank of Communications’ Tang, who warned that the economy still faces formidable headwinds in next year. In particular, Mr. Tang is concerned that consumption and investment will continue to be dragged down by the continued decline of the real estate sector, as well as the possibility of more Covid-19 shocks and slow government spending. than.

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