Record surge seen in production, new orders as industrial activity recovers China's manufacturing sector saw its strongest expansion in more than
nine years in August as production and market demand firmed up in the
aftermath of the COVID-19 epidemic, a private survey said on Tuesday. The Caixin China General Manufacturing Purchasing Managers' Index
came in at 53.1 in August, the highest level since January 2011 and up
from 52.8 a month earlier, media group Caixin said in a report. The
reading marked the fourth month in a row for the index to rise within
the expansionary territory, indicating that the manufacturing sector has
recovered at a continuously quicker pace. A reading above 50 indicates
expansion, while one below that reflects contraction. "Manufacturing demand and supply were both robust, while overseas
demand has started to pick up," said Wang Zhe, a senior economist at
Caixin Insight Group. In August, the subindexes for output and total new orders hit their
highest levels since January 2011, while the gauge for new export orders
entered the expansionary territory for the first time this year, mainly
due to a slowing spread of the pandemic overseas, the report said. In anticipation of a sustainable recovery in demand, manufacturers
increased their inventories of finished items for the first time since
April, though slightly. Some companies have even started to increase recruitment to meet
rising market demand last month, pushing the sub-gauge of employment to
the highest level this year, albeit still within the contraction
territory. "Companies' future output expectations remained strong, reflecting a
positive outlook for the manufacturing sector for the year ahead," Wang
said. Analysts said the country's manufacturing sector is set to continue
recovering in the coming months as the epidemic situation gradually
stabilizes domestically, the supportive macro policy continues, and more
overseas economies resume business activity. But the elevated uncertainties such as the global pandemic situation
and the China-US trade row could limit the strength of recovery, while
more efforts are needed to help small and medium-sized manufacturers,
especially those in the middle and western regions of the country, they
said. Wang Tao, chief China economist at Swiss bank UBS, said the
manufacturing sector is set to stay within the expansionary territory in
the rest of the year but the expansion could lose some steam on a
month-on-month basis. "Unlike in the second quarter when business activities restarted
after the lockdown and led to strong month-on-month recovery, the
economy has now largely got back on the original growth track, leaving
room for further monthly improvement limited," she said. Despite that the recovery could moderate, the Chinese economy is
expected to record a year-on-year GDP growth of between 5.5 percent and 6
percent in the second half of the year, remaining a major engine of
global recovery, she said. The official PMI for the manufacturing sector edged down to 51 last
month and indicated a slowdown in expansion, in contrast to rise of the
Caixin PMI, the National Bureau of Statistics reported on Monday. Wu Chaoming, deputy dean of the Chasing Institute of Chasing
Securities, said the divergence came in mainly as the NBS polled
manufacturers across the nation while Caixin focused mainly on the
eastern coastal parts. The floods along parts of the Yangtze River, with the central and
western regions of the country hit the hardest, have caused difficulties
in business operation of SMEs in those areas, which may not be fully
reflected in the Caixin report, Wu said. Some SMEs in the manufacturing sector may still face acute
difficulties, such as lukewarm demand, financing woes and the
floods-related disruption, Wu said, citing that the official PMI for
small manufacturers dropped to 47.7 last month from 48.6 in July. He called on strengthening targeted fiscal and monetary support for
SMEs, deepening reforms in the financial sector to better serve small
business, like promoting the development of supply chain finance.
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