China factory activity up but outlook brim

Many warn China's manufacturers will remain under intense pressure in the coming months.
Many warn China's manufacturers will remain under intense pressure in the coming months.

Factory activity in China unexpectedly expanded in March after contracting sharply to a record low but the rapid global spread of the coronavirus is expected to keep businesses and the overall economy under heavy pressure as foreign demand slumps.

China's official Purchasing Managers' Index (PMI) rose to 52 in March from a collapse to a record low of 35.7 in February, the National Bureau of Statistics (NBS) said on Tuesday, above the 50-point mark that separates monthly growth from contraction.

Analysts polled by Reuters expected the March PMI to come in at 45.0.

The NBS attributed the surprise rebound in PMI, a month-on-month indicator, to its record low base in February and cautioned that the readings do not signal a stabilisation in economic activity.

Markets reacted positively to the PMI survey, with Asian stock rising as investors seemed relieved by the rare good news as the pandemic showed few signs of abating.

China's yuan, however, did not budge, reflecting analysts' broad views that a sustainable bounce in manufacturing activity looked some way off despite a slowdown in China's coronavirus infections from its peak in February.

Many warn manufacturers and overall economic activity will remain under intense pressure in coming months in light of the rapid spread of the virus across the world, the unprecedented lockdowns in several countries and the almost near certainty of a global recession.

Beijing, at great costs to the economy, had imposed draconian quarantine rules and travel restrictions to curb the pandemic that has killed more than 3000 in the country, where it originated late last year.

But as locally transmitted infections dwindle, most businesses have reopened and life for millions of people has started to slowly return to normal.

Yet, the pace of business resumptions has been constrained by China's efforts to guard against a second wave of infections from abroad.

The survey's sub-index of manufacturing production picked up to 54.1 in March from February's 27.8, while a reading of new orders rose to 52 from 29.3 a month earlier.

New export orders received by Chinese manufacturers ticked up to 46.4 from 28.7 in February but were still mired in contraction.

Australian Associated Press