April 21, 2024
Economy

Opinion | Positive signs emerge but China economy not out of woods yet


One set of numbers in March cannot foretell China’s growth for the year, but it can strengthen signs that the world’s second-biggest economy is rebounding and the key element of confidence is returning.

A case in point is the latest release of a private manufacturing survey, the Caixin/S&P Global purchasing managers’ index (PMI).

It showed China’s manufacturing activity expanded at the fastest pace in 13 months in March, with business confidence hitting an 11-month high.

The driver was new orders from both home and abroad. The PMI of 51.1 per cent – 50 per cent separates growth from contraction – beat economists’ forecasts. It confirmed an official PMI a day earlier also showing improving sentiment among factory owners.

China’s factory activity hits 1-year high in latest sign of economic recovery

Moreover, Zhao Qinghe, a senior statistician with the National Bureau of Statistics, noted an expanded upwards trajectory of sentiment in 15 of 21 surveyed industries, compared with just five a month before.

Initial reaction among the markets was positive, with the indices coming on top of an assurance by President Xi Jinping to a delegation of business leaders from the United States that the economy was sound, and his promise of more policy support to improve the business environment.

Combined with stronger-than-expected trade and industrial output data in the first two months of this year, the PMI challenges pessimism.

It remains too early to say whether China is finally out of the woods. Seasonal factors may need to be taken into account. The external environment remains volatile and uncertain.

It can be expected that so-called overcapacity in production will become a new flashpoint with Western trade partners.

‘Everyone hates the market’: Ray Dalio says time is right to buy Chinese stocks

US Treasury Secretary Janet Yellen will discuss this issue on a visit to China this month, which will include a meeting soon after she arrives with American companies that will focus on overcapacity, particularly in solar power and electric vehicles.

It is likely to set the tone for later talks in Beijing, which also faces greater scrutiny from Europe over its exports of electric vehicles.

That said, the latest data indicates doom and gloom about growth is premature and that China is going through a restructuring of its economy.

To reduce risks inherent in serious trade frictions, Beijing needs to rely on domestic consumption.

Fortunately, that is improving and the central bank still has many options in its toolbox. It will not resort to massive economic stimulus, but focus on gradual expansion to drive an economic rebound.

Assuming confidence is sustained, that is a sound strategy for achieving the 5 per cent growth target the central government has set for this year.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

SUBSCRIBE TO OUR NEWSLETTER

Get our latest downloads and information first.
Complete the form below to subscribe to our weekly newsletter.


100% secure your website.