Mon, Jan 02, 2023 page11

• China’s manufacturing activity shrinks

  COVID-19 PRESSURE: Many Chinese factories are facing weakening external demand, with some manufacturers operating at below 20 percent capacity, a consultant said

  • Reuters, BEIJING
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  China’s factory activity shrank at the sharpest pace since the COVID-19 pandemic first emerged about three years ago, after Beijing’s abrupt reversal of counter-epidemic measures last month set off a wave of COVID-19 infections across the country.

  The official purchasing managers’ index (PMI) fell to 47.0 last month from 48.0 in November, the National Bureau of Statistics said on Saturday.

  Economists in a Reuters poll had expected the PMI to come in at 48.0. The 50-point mark separates contraction from growth on a monthly basis.

  

  People assemble speakers at an electronics factory in Anhui Province, China, on Saturday.

  Photo: AP

  The drop was the biggest since the early days of the pandemic in February 2020.

  The data offered the first official snapshot of the manufacturing sector after China removed the world’s strictest COVID-19 restrictions last month. Cumulative infections likely reached 18.6 million last month, UK-based health data firm Airfinity said.

  Analysts said surging infections could cause temporary labor shortages and increased supply chain disruptions.

  Weakening external demand on the back of growing global recession fears amid rising interest rates, inflation and Russia’s invasion of Ukraine could further slow China’s exports, hurting its massive manufacturing sector and hampering an economic recovery, they said.

  “Most factories I know are way below where they could be this time of year for orders next year. A lot of factories I have talked to are at 50 percent, some are below 20 percent,” said Cameron Johnson, a partner at Tidal Wave Solutions, a supply chain consulting firm.

  “So even though China is opening up, manufacturing is still going to slow down because the rest of the world’s economy is slowing down. Factories will have workers, but they will have no orders,” Johnson said.

  The bureau said 56.3 percent of surveyed manufacturers reported that they were greatly affected by the epidemic last month, up 15.5 percentage points from the previous month, although most also said they expect the situation to gradually improve.

  In 2021, inflation-adjusted GDP reached 114.92 trillion yuan (US$16.66 trillion), up 8.4 percent from 2020. GDP expanded 3 percent in the first nine months of last year, compared with China’s official full-year goal of around 5.5 percent.

  The World Bank expects growth for last year of 2.7 percent.

  The non-manufacturing PMI, which looks at services sector activity, fell to 41.6 from 46.7 in November, the bureau’s data showed, also marking the lowest reading since February 2020.

  The official composite PMI, which combines manufacturing and services, declined to 42.6 from 47.1.

  “The weeks before Chinese New Year are going to remain challenging for the service sector as people won’t want to go out and spend more than necessary for fear of catching an infection,” Capital Economics head Asia economist Mark Williams said.

  “But the outlook should brighten around the time that people return from the Chinese New Year holiday — infections will have dropped back, and a large share of people will have recently had COVID and feel they have a degree of immunity,” he said.
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