China’s manufacturing activity grew faster than expected in December

Investing.com – China’s manufacturing activity was better than expected in December, with new orders rising steadily on the back of demand and treatment of Chinese goods at home and abroad continuing to improve, a private survey showed on Tuesday.

The Purchasing Managers’ Index (PMI) rose to 50.8 in December, better than the expected 50.4 and slightly higher than the 50.7 in the previous month. Readings above 50 indicate expansion, which the index has now maintained for the second consecutive month.

The figure contrasts with a government survey released over the weekend that showed China’s manufacturing sector remained in decline in the final month of 2023. The official survey also showed that China’s manufacturing industry will contract in 2023, with the average PMI data over the past 12 years being 49.8.

But where Caixin’s survey differs from the official report is in the scope of companies covered – it focuses more on smaller private companies rather than the large state-owned enterprises officially investigated. Investors use the two surveys to gain a more complete understanding of the Chinese economy.

While the Caixin index showed some signs of improvement in China’s manufacturing activity, analysts noted that growth remained largely modest. Cost pressures were also modest, indicating little sign of improvement in China’s inflation this month.

“Overall, the economic outlook for the manufacturing industry continued to improve in December, with supply and demand expanding and prices remaining stable. However, employment remains a major challenge and companies are worried about the future.” Wang Zhe, senior economist at Caixin Think Tank, said in a statement stated in the report.

Zhe pointed out that the Chinese government’s fiscal and monetary support policies still need to be improved, and supporting employment must become the focus of policymakers.

China’s post-COVID-19 economic recovery largely failed to materialize last year as local companies faced new headwinds from falling demand in its biggest export market. This situation is further exacerbated as Beijing remains cautious in providing additional financial support to the economy.

Although China’s economy is still on track to achieve the government’s 5% growth target in 2023, the market remains cautious about the possibility of a rebound in growth in 2024.