Manufacturing PMI Surges to 52.0 in a 'Surprise' Rebound
[Asia Economy Beijing=Special Correspondent Park Sun-mi] China's manufacturing sector rebounded surprisingly in March, overcoming the shock of COVID-19. The dramatic improvement in the Manufacturing Purchasing Managers' Index (PMI) was due to factories, which had halted operations due to strengthened COVID-19 prevention measures, resuming full-scale production in March.
◆China's Manufacturing PMI Shows 'V'-shaped Recovery= On the 31st, China's National Bureau of Statistics announced that the manufacturing PMI for March recorded 52.0. This exceeded experts' forecast of 44.8 and rose 16.3 points from February's historic low of 35.7, surpassing the baseline of 50. The non-manufacturing PMI for March also recorded 52.3, up 22.7 points from the all-time low of 29.6 in February.
The PMI uses 50 as the baseline; a reading above 50 indicates economic expansion, while below 50 indicates contraction. As it is one of the earliest monthly economic indicators released, it is regarded as an important gauge of economic conditions.
This indicates that China is rapidly overcoming the economic shock of COVID-19 and moving toward normalization. Looking at the detailed manufacturing PMI data, the production index, which reflects production trends, rose 26.3 points from the previous month to 54.1. The new orders index also recorded 52, up 22.7 points, revealing the recovery of the manufacturing market. The raw materials inventory index and employment index recorded 49.0 and 50.9 respectively, rising 15.1 and 19.1 points from the previous month. By company size, large enterprises recorded 52.6, medium-sized enterprises 51.5, and small enterprises 50.9, showing that the larger the scale, the clearer the recovery.
◆Complete Normalization? 'Not So Sure'... Global Demand Contraction Is the Issue= Although both China's manufacturing and non-manufacturing PMIs showed clear rebounds in March, the general sentiment is that it is premature to conclude that the Chinese economy has fully normalized to pre-COVID-19 levels based on these figures.
The National Bureau of Statistics stated, "As of March 25, the resumption rate of operations for medium and large enterprises in China was 96.6%, up 17.7 percentage points from the survey on February 25, showing a stable recovery in production and living order," adding, "Due to the effectiveness of COVID-19 prevention measures, the production and management conditions of enterprises have significantly improved compared to February." However, it added, "Since the PMI is sensitive to short-term economic changes and reflects improvements in production and management, it is still too early to judge that the Chinese economy has fully normalized. The trend needs to be continuously monitored."
The day before, China's Ministry of Industry and Information Technology (MIIT) also announced that 98.6% of Chinese companies with sales exceeding 20 million yuan had resumed operations as of the 28th, and 89.9% of employees had returned to work. However, it noted that companies are still facing many difficulties due to global demand decline and supply chain disruptions. It emphasized the urgent need to support companies, especially those highly dependent on exports, to overcome these challenges. The MIIT plans to promote consumption and increase orders by holding exhibitions, sales events, and fairs using online platforms to support the import-export industry.
Experts express concern that the manufacturing recovery in China may be short-lived due to the ongoing spread of COVID-19 outside China, and that the Chinese economy could be hit by the gloomy global economic environment.
Chen Wang, Chief Economist at Vanguard Investments, said, "The PMI rebound indicates a gradual recovery, but factors weighing down the Chinese economy still remain. Domestic demand is sluggish, and global economic growth prospects are deteriorating. Even if the economy recovers in the second half of the year, China's growth rate is expected to be only 1-2% this year." Tian Yun, Vice Chairman of the Beijing Economic Operation Association, also said, "Overseas orders placed before March have been suddenly canceled or delayed due to the spread of COVID-19, increasing uncertainty for China's export-dependent manufacturing sector amid the pandemic."
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