China’s manufacturing sector retains recovery in December

China’s manufacturing sector continued its recovery in December, with the purchasing managers’ index (PMI) holding steady at 50.1 per cent, marking three consecutive months in the expansion zone, data showed.

According to China Central Television (CCTV), the China Federation of Logistics and Purchasing (CFLP), in collaboration with the National Bureau of Statistics’ Service Survey Centre, announced that the momentum of economic recovery continued into December. This positive trend is supported by the combined effects of macroeconomic policies.

The implementation of the existing policies, alongside a new set of stimulus measures, has accelerated the recovery of market demand.

The New Orders Index rose to 51 per cent, up 0.2 percentage points from the previous month, marking its fourth consecutive month of growth.

Exports also showed steady improvement, with the New Export Orders Index at 48.3 per cent, up 0.2 percentage points from the previous month, rising for the second month in a row.

Additionally, the equipment manufacturing PMI reached 50.6 per cent in December, marking five consecutive months of expansion and sustaining robust development. By enterprise size, the PMI for medium-sized enterprises climbed to 50.7 per cent, entering the expansion zone for the first time in eight months, while both large and medium-sized firms remained in positive territory.

On a quarterly basis, the average manufacturing PMI for the fourth quarter stood at 50.2 per cent, significantly higher than the 49.4 per cent recorded in the third quarter.

Meanwhile China’s industrial profits fell at a slower clip in November, official data showed, but the annual decline in earnings this year is expected to be the worst in over two decades due to persistently soft domestic consumption.

The world’s second-largest economy has been struggling to mount a strong post-pandemic revival, as business and household appetites for spending and investment remain subdued amid a prolonged housing downturn and fresh trade risks from the incoming US administration of President-elect Donald Trump.

Industrial profits fell 7.3 per cent in November from the same month last year, following a 10 per cent drop in October, National Bureau of Statistics (NBS) data showed.

The narrower decline in November pointed to improved profits as recent economic stimulus measures start to have an effect, said Zhou Maohua, a macroeconomic researcher at China Everbright Bank.

The profit numbers were also in line with a slower decline in factory-gate prices in November. The producer price index fell 2.5 per cent year-on-year versus the 2.9 per cent drop in October.

The World Bank on Thursday revised up its 2024 economic growth forecast for China slightly to 4.9 per cent from its June forecast of 4.8 per cent. Still, in the first 11 months of 2024, industrial profits declined 4.7 per cent, deepening a 4.3 per cent slide in the January-October period, reflecting still tepid private demand in the Chinese economy.

China’s full-year industrial profits are set to show their biggest drop in percentage terms since 2011. However, when smaller companies are included under a previous compilation methodology, this year’s profit decline is expected to the worst since at least 2000.

A spate of economic indicators released this month pointed to mixed results, with industrial output accelerating in November while new home prices fell at the slowest pace in 17 months.

The industrial sector is undergoing an uneven recovery amid insufficient demand, Zhou said, pointing to difficulties facing real estate and some related industries as evidence of this malaise.

China’s leaders vowed in a key policy meeting this month to raise the deficit, issue more debt and loosen monetary policy to maintain a stable economic growth rate. The government also recently pledged to step up direct fiscal support to consumers and boosting social security.

Beijing has agreed to issue a record $411 billion special treasury bonds next year, Reuters reported.

Profits at state-owned firms fell 8.4 per cent in the first 11 months, foreign firms posted a 0.8 per cent decline and private-sector companies recorded a 1 per cent fall, according to a breakdown of the NBS data.

Industrial profit numbers cover firms with annual revenues of at least 20 million yuan ($2.7 million) from their main operations.

The world’s second-largest economy has been struggling to mount a strong post-pandemic revival, as business and household appetites for spending and investment remain subdued amid a prolonged housing downturn and fresh trade risks from the incoming US administration of President-elect Donald Trump.

The profit numbers were also in line with a slower decline in factory-gate prices in November. The producer price index fell 2.5 per cent year-on-year versus the 2.9 per cent drop in October.