Workers at a car seat manufacturing plant in Xi’an, Shaanxi Province, northwest China.

Liu Xiao | Xinhua | Getty Images

A special survey on Monday showed that factory activity in China expanded for the sixth consecutive month in October, as business confidence grew to its strongest levels in years.

The Caixin / Markit PMI for Chinese manufacturing came in at 53.6 for October, better than analysts’ expectations of 53.0 in a Reuters poll. The survey results showed that the last reading was the highest since January 2011.

PMI readings above 50 indicate expansion, while PMI readings above 50 indicate contraction. PMI readings are sequential and indicate expansion or contraction on a monthly basis.

China’s huge manufacturing industry is recovering as the country’s coronavirus outbreak appears largely under control. Wang Zhi, chief economist at Caixin Insight Group, said the Caixin / Markit PMI for October showed that the country’s manufacturing recovery continued to rise.

“In short, recovery was the word in the current macroeconomic, while controlling the domestic epidemic,” he said in a statement accompanying the release of the data.

“Manufacturing supply and demand improved at the same time. Companies were very willing to increase stocks. Prices tended to stabilize. Business operations improved, and entrepreneurs became confident.”

The special poll came after the release of the official Chinese manufacturing PMI over the weekend, which came in at 51.4 for October – the eighth consecutive month of expansion. Analysts polled by Reuters had expected a reading of 51.3.

An official PMI survey usually polls a large percentage of large corporations and state-owned enterprises. In contrast, Caixin / Markit’s survey features a larger mix of SMEs.

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External suspicions

Wang said the latest Caixin / Markit survey showed that both demand and supply for Chinese manufacturing goods continued to recover as the “repercussions of the Covid-19 pandemic fade away”.

He noted that companies have remained cautious about hiring. He said a full recovery in employment depends on “greater and more durable business confidence”.

“Since the economic indicators of consumption, investment and industrial production for September were generally better than expected, it is likely that the economic recovery will continue during the next several months,” he said.

He added, “But there are still many uncertainties outside China, so policy makers need to be careful about normalizing monetary and fiscal policies after the Coronavirus.”

The renewed Covid-19 outbreak in Europe and the United States was one of the external uncertainties Wang cited, which he said may have contributed to the weakening of the recovery in external demand for Chinese goods. He added that this may put pressure on Chinese exports in the coming months.

By Elvira Soto

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