Report shows China’s factory activity is stabilising

According to a recent report, China’s manufacturing output in March rebounded from the previous month’s record low.

The Caixin China manufacturing purchasing managers index (PMI), which focuses on smaller, private manufacturers, moved into positive territory last month. The PMI is a diffusion index incorporating survey results conducted on manufacturing firms throughout the country.

The modest, yet bullish figures released on 01.04.20, show a jump to 50.1 from a record 40.3 in February – the lowest since the index was introduced 16 years ago.

A reading above 50 suggests the manufacturing sector is in expansion, while a reading below 50 places China’s manufacturing sector in contraction.

Policymakers and traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance rather than waiting for hard data to emerge.

The recent figures come as firms reopened following widespread company shutdowns and travel restrictions in February during the peak of the COVID-19 outbreak.

Dr Zhengsheng Zhong, Chairman and Chief Economist at CEBM Group, China’s largest independent investment research firm said, “China’s manufacturing economy was impacted by the epidemic last month [February]. The supply and demand sides both weakened, supply chains became stagnant, and there was a big backlog of previous orders. However, manufacturers were more confident. The economy will be able to see a significant rebound when the epidemic is gradually contained, and companies accelerate the resumption of business amid more proactive fiscal and monetary policies.”

Zhong’s comments are in line with manufacturers’ sentiments as they anticipate a recovery in production over the next year.

The report reinforces China’s official manufacturing index which showed early signs of economic recovery, with many companies optimistic that demand will pick up once the coronavirus pandemic situation improves. More notably, the degree of positive sentiment was the strongest seen for five years.

China’s official manufacturing PMI, which focuses more on large, state-owned firms, jumped to 52.0 in March from a record low of 35.7 in February, according to the National Bureau of Statistics.