- The economy’s recovery trajectory came after Covid restrictions were dropped late last year
- The manufacturing Purchasing Managers’ Index(PMI) rose to 52.6 last month
Harare - China the world’s second-largest economy recorded one of its worst years in nearly half a century in 2022 due to strict Covid-19-induced lockdowns and subsequent widespread infections in most Chinese provinces. The curbs were abruptly lifted in December as the highly transmissible Omicron variant spread like wildfire across the country.
However, China’s economy is showing signs of a stronger rebound after Covid restrictions were abandoned, with manufacturing posting its biggest improvement in more than a decade, services activity climbing, and the housing market stabilising.
The manufacturing Purchasing Managers’ Index(PMI) rose to 52.6 last month well above the 50-point mark that separates expansion and contraction in activity, the highest reading since April 2012. A non-manufacturing gauge measuring activity in both the services and construction sectors improved to 56.3. Both indexes beat economists’ expectations.
The PMIs provide the first comprehensive data on the economy’s recovery after Covid restrictions were dropped late last year, infection waves began easing and businesses returned to normal after the Lunar New Year holidays. The figures add to other signs of a rebound in the economy and put policymakers in a good position ahead of next week’s National People’s Congress, where a new growth target will be disclosed.
This rebound is positive for China since India’s GDP growth outpaced China last quarter. India’s economy grew by 4.4% in the last fiscal quarter, down from 6.3% the previous quarter. Meanwhile, Asia’s largest economy grew slower than India’s for the first time since 2016. China’s National Bureau of Statistics reported the country’s annual GDP to be ¥121.02 trillion ($17.94 trillion), a 3% increase from the previous year. China’s GDP exceeded ¥100 trillion for the first time in 2020
Economists had expected closer to 4.6% for India but this still puts India’s average annual GDP growth for last year at about 7%, making it one of the world’s best-performing economies.
By comparison, the World Bank projects the global economy will grow just 1.7% this year—the third-weakest pace of global growth in almost three decades.
India’s economy has grown despite rising prices. The year-over-year retail inflation rate in January hit 6.52%. That’s well above the Reserve Bank of India’s stated goal of 6%. In response, the Indian central bank raised interest rates by a quarter of a percent last month, bringing it to 6.5%.
However, Economists have also cautioned that even as the improving factory data for the Chinese economy suggests that recovery is becoming more balanced, there are still headwinds, as global demand remains weak and exports will likely contract this year.
Other data has signalled a pickup in domestic demand. China’s home sales rose in February from a year earlier, the first such increase since June 2021 as policymakers expanded support for the sector. Road congestion in major cities has increased, subway ridership has returned to pre-pandemic levels and restaurant and mall spending has risen.
A recovery in economic growth this year will lead to an improvement in local governments’ fiscal conditions, Finance Minister Liu Kun said during a briefing on Wednesday. China will moderately expand fiscal spending in 2023 to ensure the overall level of government investment won’t decline, he said.
Manufacturing companies have also seen surging purchasing prices in steel and related downstream industries.
“The decent PMI readings provide a positive note for the upcoming National People’s Congress. We expect the Chinese government to roll out further supportive policies to cement the economic recovery,” said Gerald Macheka, an economist at Equity Axis.
Chinese businesses increased their resumption of work and production, as the effect of economic stabilisation policies was felt by most sectors while the impact of Covid-19 receded, the NBS said in a separate statement.
Furniture manufacturing, metal products, and electrical machinery equipment saw big improvements, with production and new order indexes in these industries all above 60.0.
Construction activity, which is part of the official non-manufacturing PMI, also picked up, standing at 60.2 from 56.4, partly due to the resulting boost to infrastructure spending and increasing financing to help developers complete stalled projects.
Services activity also continued to rise with improvements in the transportation and accommodation sectors.
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