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Factory activity growth soars

Abstract : Factory activity grew at its fastest pace in a decade in November, indicating that economic momentum in the world's second-largest economy is returning to pre-pandemic levels, experts said on Tuesday.

Factory activity grew at its fastest pace in a decade in November,
indicating that economic momentum in the world’s second-largest economy
is returning to pre-pandemic levels, experts said on Tuesday.

Policymakers are expected to be careful while enacting further policy
measures as they do not want the measures to impede the economic
recovery, they said.

The Caixin China General Manufacturing Purchasing Managers’ Index
rose to a 10-year high of 54.9 last month, versus 53.6 in October,
pointing to the strongest improvement in operating conditions for
Chinese manufacturers in a decade, media group Caixin said in a report.

A PMI reading above 50 indicates expansion, while one below that reflects contraction.

Meanwhile, the official manufacturing PMI also indicated the fastest
expansion of the sector for three years. The reading increased to 52.1
in November, the highest level since September 2017, when the reading
came in at 52.4, the National Bureau of Statistics said on Monday.

Both PMI readings have beaten market expectations and suggested an
accelerating recovery of the Chinese economy from COVID-19, especially
in the manufacturing sector, analysts from Nomura Securities said in a
report.

Recovery in demand both at home and abroad bolstered the growth in
factory activity and has since replaced the work resumption efforts to
buoy output, experts said.

Output and new orders grew at the fastest pace in a decade last
month, with strong domestic demand sustaining the recovery in demand,
the Caixin report said.

New export orders rose steadily as overseas production continued to
be hampered by the pandemic uncertainties, with the sub-measure for the
category rising on a monthly basis, the report said.

“Manufacturing enterprises bolstered their inventories to meet demand
and they were quite confident about the economic outlook for the next
12 months. We expect the economic recovery to continue for several
months,” said Wang Zhe, a senior economist at Caixin Insight Group.

Experts expect the Chinese economy to post a growth of close to 6
percent during the last quarter of the year. The growth may further rise
to double digits in the first three months of next year, thanks to a
low comparison base and demand-side recovery for consumption and
manufacturing investment, they said.

Zhang Wenlang, chief macroeconomic analyst with investment bank China
International Capital Corp Ltd, said the rally in domestic demand
should continue to speed up next year as the pandemic situation further
stabilizes while household income and employment improve.

China’s A-share market rose on Tuesday with the benchmark Shanghai
Composite Index rising by 1.77 percent to 3451.94 points, as
macroeconomy-sensitive sectors like machinery, financials, and autos
rallied, according to market tracker Wind Info.

However, the recovery may begin to lose momentum from the second
quarter of 2021, experts said, partly as the pandemic has made market
entities more conservative in spending while debt pressure rises after a
faster credit expansion this year.

Considering the remaining uncertainties at home and abroad, it
requires “careful planning” to withdraw the easing policies launched
during the epidemic, Wang said.

Ren Zeping, chief economist of property developer Evergrande Group,
said exports and investment in infrastructure as well as real estate
have been the main drivers of economic recovery so far but may face
downward pressure going forward, while small businesses and the
employment situation continues to be under pressure.

While the Caixin survey said manufacturers expanded workforce last
month, the larger NBS survey indicated that the contraction in
employment persisted.

“It is too early to talk about tightening monetary policy,” Ren said,
adding that structural liquidity support for infrastructure and
hard-hit sectors should continue.

Analysts from Nomura Securities said Beijing is expected to maintain
its wait-and-see approach to policy in the near term, neither easing
further nor starting to tighten.

(Source: China Daily)

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Source: Factory activity growth soars

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