China’s manufacturing sector expanded at its fastest pace in more than a decade in February, in one of the clearest signs that the world’s second-largest economy is shaking off the effects of a nationwide Covid-19 outbreak and years of growth-constraining pandemic curbs.
The official manufacturing sector purchasing managers’ index hit 52.6 last month, according to the National Bureau of Statistics, up from January’s reading of 50.1 and beating economists’ expectations of 50.5. The reading was the highest since April 2012.
A figure of more than 50 on the index, which surveys companies about their activity, indicates an expansion, while one below signals a contraction.
The data is an early indication of recovery across China’s economy, which grew just 3 per cent last year under the strictures of President Xi Jinping’s zero-Covid policy and a wave of infections in big cities. Beijing’s decision to abruptly unravel the restrictions in December spurred a gradual resumption of activity.
“If your starting point is very weak, as it was at the end of last year, then obviously you are going to get a higher share of firms seeing improvement,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
“It doesn’t mean that the level of economic activity in China is back to healthy levels yet, but it does mean it’s quite quickly moving in that direction,” he added.
While growth is widely expected to rebound this year, Chinese policymakers, who will convene in Beijing this weekend for the rubber-stamp National People’s Congress, are still grappling with a flailing property sector and falling global demand for exports.
Other metrics pointed towards growing momentum for the recovery. The Caixin China General Manufacturing PMI, a closely watched private gauge that focuses less heavily on state-owned enterprises, registered its first expansion in seven months in February, at 51.6, while data from China Real Estate Information indicated home sales increased last month for the first time in almost two years.
The official manufacturing PMI reading was buoyed by especially strong figures for production and new orders, indicating a resurgence in both demand and supply. But the sub-index tracking raw material inventories at factories remained in contraction, while a gauge monitoring employment levels notched only a minor expansion.
Enthusiasm for China’s economic reopening is not universally shared. A survey published by the American Chamber of Commerce in China on Wednesday revealed lingering pessimism among US companies, with 24 per cent saying they were considering moving manufacturing or sourcing out of the country, a 10 percentage point increase from last year.
Colm Rafferty, chair of AmCham China, said in a statement that bilateral relations between China and the US had become “increasingly complex for the American business community in China to navigate”.
The report came weeks after a position paper from the European chamber called for greater access for foreign businesses and criticised the zero-Covid policy.
Elsewhere in the region, higher interest rates weighed on Japanese factory activity, which contracted in February at its fastest pace in more than two years, according to a private survey. South Korean exports, meanwhile, notched a fifth consecutive monthly decline.