Wed, Apr 01, 2020 page10

• China’s factory activity rebounds

  NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month

  • AFP, BEIJING
  • • 
    • 
    • 

  Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt.

  China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill.

  The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February, while industrial production contracted for the first time in 30 years as the country essentially shut up shop.

  

  An employee works on a battery production line at a factory in Huaibei in China’s Anhui Province on Monday. Factory activity in China last month rebounded from a record low.

  Photo: AFP

  However, the purchasing managers’ index (PMI) yesterday came in well above expectations, hitting 52 for last month, the Chinese National Bureau of Statistics said.

  That is well above the 35.7 from a month earlier and beat forecasts of 44.8 in a Bloomberg survey. Anything above 50 is considered expansion.

  The bureau said that the number “reflects that over half of surveyed companies had improvements in their resumption of work and production from the month before.”

  However, it added that “it does not represent that our country’s economic operations have returned to normal levels.”

  Non-manufacturing PMI came in at 52.3, also well above analyst predictions.

  Bureau senior statistician Zhao Qinghe (趙清河) said that despite the rebound in the manufacturing PMI “there remains relatively large pressure on enterprises’ production and operations.”

  A larger proportion of firms face tight funding and insufficient market demand this month, with “new severe challenges” ahead as the virus sweeps the planet, dragging down trade growth, Zhao said.

  Analysts expect the PMI to fall back into contraction territory next month.

  “We shouldn’t read too much into this sharp rebound,” said Tommy Xie (謝東明), head of greater China research at OCBC Bank Ltd (華僑銀行).

  “February was really a bad month for China... [Manufacturers] had a huge supply disruption because of shutdowns of factories and movement controls,” Xie said. “Any recovery from February ... was kind of a done deal.”

  China is likely to see the effect of a “demand shock” in April, which could be a more significant indicator, he added, as global demand dwindles and factories abroad suspend operations.

  New export orders remained below the 50 mark last month, alongside imports, reflecting that domestic demand recovered faster than external demand, said Iris Pang (彭藹嬈), chief economist for greater China at ING Bank NV.

  “I think people have already forgotten ... that even if the coronavirus subsides in the US, there could be a high chance the technology war and trade war return,” said Pang, referring to lingering trade tensions between China and the US.

  Analysts have also cautioned that other economic data for last month might be less rosy.

  Nomura Holdings Inc analysts Lu Ting (陸挺), Wang Lisheng (王立升) and Wang Jing (王競) said in a note ahead of the PMI data release that they expect “deeply negative growth for almost all activity data in March,” given the relatively slow business resumption rate and slump in external demand.

  Meanwhile, the World Bank yesterday cautioned that the global economic fallout could see China’s economic growth slump to 2.3 percent this year, from 6.1 percent last year.

  The East Asia and Pacific region, excluding China, could see growth slow to 1.3 percent in the baseline or contract 2.8 percent in the more pessimistic scenario, as compared with 5.8 percent last year, the World Bank said in a report.
• Most Popular

  • 1

    LA Dodgers show off World Series rings

  • 2

    Homeless Sudan club defy odds in CAF Champions

  • 3

    Dodgers edge Tigers and Yankees beat Brewers in opening games in the US

  • 4

    Michkov key as Flyers beat Predators

  • 5

    US hands over first long-awaited F-16