Chinese factory growth slows in March as post-COVID boom fades - Caixin PMI

By Ambar Warrick

Investing.com -- Growth in China’s manufacturing sector slowed in March, a private survey showed on Monday, as production remained subdued amid weak international demand and as a post-COVID economic boom appeared to be running out of steam.

The Caixin Purchasing Managers’ Index (PMI) grew 50 in March, barely remaining in expansion territory and retreating from an eight month high of 51.6 hit in the prior month. The reading also missed expectations for growth of 51.7. 

Monday’s data comes in line with government data from last week that showed that growth in China’s manufacturing sector was slowing after an initial post-COVID bounce. While the sector stabilized after the withdrawal of anti-COVID measures, it is still facing increased headwinds from sluggish order growth and weak overseas demand. 

Deteriorating economic conditions across the globe have crimped demand for Chinese goods, in turn affecting the profitability of local factories. This saw production and new orders rise at a smaller pace in March than the prior month. 

The Caixin survey differs from the government reading on two counts, wherein it targets smaller, private enterprises as compared to the larger public sector units covered by the official survey. 

But Monday’s reading also furthers the notion that an economic recovery in China has remained largely uneven since the withdrawal of anti-COVID measures. Service sector activity has vastly outpaced a recovery in manufacturing, although the latter usually acts as a bellwether for the Asian economy.

“In March, there were signs of weakening in the rebound…The foundation for economic recovery is not yet solid. Looking forward, economic growth will still rely on a boost in domestic demand, especially an improvement in household consumption,” Wang Zhe, Senior Economist at Caixin Insight Group said in a statement.

Still, Zhe noted that Chinese businesses still remained largely optimistic over an economic recovery this year, and that business processes were also normalizing after the reopening.

“Manufacturers remained highly optimistic, with the reading for their expectations for future output significantly higher in March than the long-term average, as they expressed strong confidence in a post-Covid economic rebound.” 

A Chinese economic recovery is a key source of focus for Asian markets this year, given the country’s position as a major trading hub for the region.