30 November 2023

Reuters: China’s manufacturing recovery slows, top CCP fears demand drags on recovery

The exterior of the China Import and Export Fair (Canton Fair) held in Guangzhou.  (April 16, 2023)
The exterior of the China Import and Export Fair (Canton Fair) held in Guangzhou.

The exterior of the China Import and Export Fair (Canton Fair) held in Guangzhou.


According to experts surveyed by Reuters on Friday, April 28, the activity of Chinese industries would reportedly slow down in April. This is due to weak global demand and a continued slump in China’s real estate sector. China’s top leaders say that lack of demand is becoming an obstacle to economic recovery.

Twenty-three economists participated in the survey. Their median forecast for April’s manufacturing purchasing managers’ index (PMI) was 51.4, down slightly from March’s 51.9%. A reading below 50 indicates contraction, while a reading above 50 signals expansion.

The prognosis is less optimistic than one made public on Friday by renowned Chinese think group Zhonghong Guoyan. According to the report, China’s manufacturing purchasing managers index in April did not decline, but may increase to 53.5, the highest since December 2020. The import index was 50.9%, which continued to be in the expansion range.

After China abandoned its strict anti-epidemic policy last year, it has experienced a major outbreak of the epidemic for nearly two months. After that, the epidemic was basically over and the economic recovery was on track. China’s official data showed that GDP grew by 4.5% in the first quarter, which was higher than people’s expectations.

However, this data is completely contrary to what people have seen. Unemployment in China’s core economically developed regions is very serious, and factories and stores have closed down countless times. Due to festivals and epidemics in January and February, economic activities have basically stagnated.

The uncertainty faced by China’s manufacturing industry has not yet been significantly reduced. The banking crisis in developed countries and the slowdown of economic growth in the world’s major economies have not been fundamentally improved, which has brought enormous pressure to China’s huge workforce in the manufacturing and trading industries.

A job fair held in Chongqing attracted a large number of young people looking for jobs. (April 11, 2023)

The Communist Party’s Politburo held an economic work conference on Friday, and the announcement from the meeting revealed the concern of the party’s top authorities about the lack of demand. China’s official media Xinhua News Agency reported that the meeting believed that China’s current demand is still insufficient, and economic transformation and upgrading are facing new obstacles. Recovering and expanding demand is the key to the current economic recovery.

The meeting emphasized the need to take various measures to increase residents’ income, improve the consumption environment, and stimulate private investment.

Reuters quoted ANZ senior economist Bansi Madhavani as saying, “China’s container freight index in April was lower than in March, reflecting the weakening of new export orders. Signal.”

Some steelmakers in China are cutting capacity due to weak demand from the property sector. Another factor, experts believe, is the small scale of local government special bond issuance in China, which limits further investment in infrastructure, and demand in this area will also fall from March levels.

A few days ago, the National Bureau of Statistics of China announced that the total profits of industrial enterprises above designated size in the country fell sharply in the first quarter, down 22.9% year-on-year from January to February, and 21.4% in March.

Since China began reform and opening up in the 1980s, the real estate industry has been the pillar industry of China’s economic growth for most of the time. However, in the past two years, the industry has been plagued by debts and defaults have continued, and it has fallen into a long-term downturn.

In recent months, the Chinese government has lifted many restrictions on the industry due to the need for economic recovery, and introduced some supportive measures, but it is not enough to change the weak state of the entire industry. It is generally believed that the recovery of the whole industry seems to be too early.

The National Bureau of Statistics of China plans to release the Manufacturing Purchasing Managers Index (PMI) for April on Sunday, April 30.

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