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China’s factory growth rebounds, but with a snail-like pace

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China's production levels show postive rebound
China's production levels show postive rebound, Photo by Pat Whelen on Unsplash

By August 2020, the pandemic spread was mainly controlled in China, with everyday life springing back to normal. The containment of the virus marked the reopening of the production activity.

One of the key aspects to measure economic bolster for a country is PMI, which talks of the grade of production levels.

Recently on 31 October 2020, The Purchasing Manger’s Index (PMI) of China’s manufacturing activity slumped from 51.5 in September to 51.4 in October, according to the National Bureau of Statistics (NBS) in China.

A PMI above the 50 number mark means signs of growth.

Julian Evans-Pritchard, the senior China economist at Capital Economics, expressed his views on the NBS press release.

He said, “It’s not too surprising that the manufacturing PMI has started to level off since growth in the industry has already returned to its pre-virus level.”

Though the PMI for October was less compared to September month, it was lower than the market researchers’ expectations. A mark of 51.3 in October month was expected as per their estimates. But the 0.1 spikes proved China’s recovery and confirmed that it is back on manufacturing track.

The official at NBS Zhao Qinghe celebrated this by saying, “The manufacturing industry overall continues to pick up.”

The prominent reasons cited behind a rebound in the Chinese economy are high consumer demand and stout exports.

Compared to other countries across the globe, China did not have any mandated lockdowns after August 2020.

The PMI surge mostly focused on new export orders by big dealers from China which were low between April-July. Besides this, the world market’s export orders from China rose as other countries reported low production levels.

Zhou Maohua, an analyst at China Everbright Bank, unraveled the reason behind the recovery by saying, “The data, particularly new export orders, indicates October’s trade figures stay strong.”

Nextly the Chinese government released infrastructure stimulus packages for ushering the production activity. Hence the rebound marked the boost in the industrial sector for China’s economy.

The slow-paced recovery

Talking of the snail-like recovery, Zhou Maohua said that “pandemic scare could diminish the hopes of the production equally matching the export demand.”

The increase in the import cost for raw materials did not provide for completely robust export demand.
Some companies reported that the pandemic’s resurgence had enlarged procurement periods for imports of raw materials and increased transport costs.

While the PMI Index showed business health falling in place, the job market prospects remained bleak. The companies in China played off employees due to low revenues and profits in the pandemic. The layoffs occurred significantly in small companies, as they faced the wrath of weak demand.

Compared to its par-level countries, China is rebounding much faster as per recent data reports of NSB. This statistical data is polling in favor of the recovery of China’s economy.

An avid learner having infatuation for numbers and finance. Also, an individual with unfiltered opinions who likes to mix the metrics of both professionalism and creativity.

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