China's Manufacturing Indicators Hit 11-Year High... "Reopening Effect" (Comprehensive)

Thanks to the significant easing of quarantine policies and the reopening (economic normalization) effect, China's manufacturing business index last month recorded the highest level in about 11 years.

According to the National Bureau of Statistics of China on the 1st, the official manufacturing Purchasing Managers' Index (PMI) for February was recorded at 52.6. This is the highest figure in 10 years and 11 months since April 2012 (53.3). It also significantly exceeded the previous month's figure (50.1) and experts' forecast (50.5).

[Image source=Reuters Yonhap News]

China's Manufacturing Index Hits Highest Level in 11 Years

The manufacturing PMI is compiled by surveying purchasing managers from over 700 manufacturing companies nationwide on five categories: new orders, production, shipments, inventory, and employment. If the index is above the baseline of 50, it indicates an expansion phase of the economy; if below 50, it indicates a contraction phase. Due to the impact of the zero-COVID policy, which represents a high-intensity quarantine policy, China's manufacturing PMI showed a sluggish trend last year but surpassed the baseline at 50.1 in January this year, returning to an expansion phase for the first time in four months since September 2022.

The non-manufacturing (service sector) PMI, which is directly affected by policy, recorded 56.3 last month. This also exceeded the previous month's figure (54.4) and the forecast (55.0). The composite PMI rose further from the previous month's 52.9 to 56.4.

On the same day, the private index (Caixin Manufacturing PMI) compiled and announced by the Chinese economic media Caixin also recorded 51.6, surpassing both the previous month's figure (49.2) and the forecast (50.2). This is the first time in six months that the private index has exceeded the baseline (50.0).

[Image source=Yonhap News]

"Economic Recovery Phase After COVID Peak"

Caixin cited explanations from company officials interviewed during the survey process, stating, "Recently, restrictions on epidemic prevention have been eased, reducing obstacles to production and improving demand," and added, "Manufacturing production and sales have rebounded." Furthermore, they noted, "Investment has increased significantly, and sales of consumer goods have also grown rapidly."

Wang Zhe, Chief Economist at the Caixin Think Tank, diagnosed, "Economic recovery accelerated in February, and supply and demand expanded," adding, "External demand and employment have also begun to recover, and logistics recovery has sped up, giving manufacturing companies confidence in a future boom." Caixin stated, "After the epidemic has passed its peak, the economy has entered a recovery phase," but cautioned, "However, the impact of the epidemic is still significant and widespread, so the recovery foundation is not solid," and predicted, "It will take time for production and daily life to fully normalize."

This manufacturing business index attracted even more attention as it was released just before the Lianghui (National People's Congress and Chinese People's Political Consultative Conference), which marks the full launch of Xi Jinping's third term as China's president. At the opening ceremony of the NPC on the 5th, Premier Li Keqiang will disclose the government's economic growth target for this year in his final government report. Although the February manufacturing index is unlikely to be directly reflected in this figure, it can provide confidence and grounds for the overall economic recovery.

The market expects the Chinese government to set a growth target in the 5% range this year. This forecast reflects a mixed outlook, with the sluggish economy last year growing only 3%, benefiting from the base effect, while concerns remain that the rapid recovery of key science and technology industries and the real estate market may be difficult.

This content was produced with the assistance of AI translation services.