Daily Management Review

China Records First In 4 Months Growth In Factory Activity In March


China Records First In 4 Months Growth In Factory Activity In March
Data from an official survey in China published on March 31 showed that there was an increase in factory activity in March for the Chinese economy for the first time in four months which was unexpected for analysis. This also indicated that the stimulus measures implemented by Chinese government could be taking effect.
It is possible that the ailing manufacturing sector in China could be on a recovery path if the improvement in business conditions were sustained for a period of time. That would means that the fears of China slipping into an economic recession would be erased.
According to data released by the National Bureau of Statistics (NBS) on March 31, compared to a three-year low of 49.2 in February, the official Purchasing Managers' Index (PMI) increased to 50.5 in March which was the first growth in the number in the last four months. The 50-mark separates growth from contraction on a monthly basis.
In March, the pace of factory output was the fastest in six months compared to a brief contraction in the month earlier. Compared to February’s number of 49.5, it reached 52.7 in March which was the highest for the number since September 2018. There was also growth in total new orders.
However there was a drop in export orders for the 10th month at a stretch which indicated sluggishness in external demand and the need for possible further policy cushion if there is an increase in the US-China trade war. There have been more signs of dropping demand in all of China’s trade dependent neighbouring countries - Japan, South Korea and Taiwan.
The import tariffs imposed on each other’s goods by both the US and China is still applicable even as the two parties hold negotiations on a trade deal. However there is no clarity if the two sides can come to a mutually acceptable agreement to end the eight month old trade war.
Last week, a US trade delegation visited Beijing to hold the first face-to-face talks with Chinese trade representatives since about a month. Chinese Vice Premier Liu He is slated to visit Washington for more negotiations on April 3.
According to published reports, there has been progress made in virtually all areas of trade and there have been some great developments in the sticky area of forced technology transfers.
In March, more of employees were laid off by Chinese factories as there was a marginal rise in the employment sub-index to 47.6 compared to 47.5 in February.
In recent month, decisions to shut down their plants in China have been taken by a host of foreign companies - from car makers to electronics manufacturers, because of rising costs of labour costs and weaker sales. There is anticipation of more lay offs. The rate of joblessness for February was close to a two year high at 5.3 percent.
According to data from the PMI survey, the economic conditions in China have hit small and mid-sized manufacturers more than it impacted large companies.