COVID-19 resurgence slows down China’s factory activities

China’s factory activities slowed down in March as the country faced downward pressures including a resurgence in COVID-19 infections domestically and mounting geopolitical uncertainties.

The purchasing managers’ index (PMI) for China’s manufacturing sector has eased to 49.5 in March from 50.2 in February, data from the National Bureau of Statistics (NBS) showed on Thursday.

A reading above 50 indicates expansion, while a reading below reflects contraction.

Clusters of epidemic outbreaks across the nation, along with rising global geopolitical uncertainties, have affected the production and operation of enterprises, noted NBS senior statistician Zhao Qinghe.

Fueled by the growing prices of bulk commodities in the international market, the sub-index measuring purchase prices of major raw materials rose 6.1 percentage points from February to 66.1.

Prices at the factory gate came in at 56.7, up 2.6 percentage points from last month.

Production and market demand in the manufacturing sector weakened last month, as the sub-index for production retreated 0.9 percentage points to 49.5, while that for new orders dropped 1.9 percentage points to 48.8.

Enterprises in some areas temporarily cut production or stopped production due to the pandemic, and the production and operation of upstream and downstream enterprises have been also affected, Zhao said.

Some enterprises have borne the brunt of geopolitical uncertainties as their overseas orders were axed or cancelled, he added.

Bucking the overall downward trend, the high-tech sector continued expansion, with its PMI in positive territory at 50.4, demonstrating its high resilience.

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The data also showed that large enterprises sustained steady operations this month, with the PMI standing at 51.3.

The PMI for medium-sized firms entered the contraction zone at 48.5, while that for small enterprises stood at 46.6.

Business activities in the non-manufacturing sector were also affected by COVID-19 resurgences, said Zhao.

Zhao noted that the PMI for business activities in the services sector stood at 46.7, down 3.8 percentage points from that in February.

Enterprises in sectors such as railway transport, aviation, accommodation, and catering were facing increasing pressure, while sectors like telecommunications, satellite transmission, as well as currency and financial services, continue to be in the expansion territory.

The overall business expectation of the construction sector has strengthened, with the sub-index for business activities in the sector standing at 58.1 in March, increasing by 0.5 percentage points from the previous month.

With the economy facing headwinds at home and abroad, the country has pledged to roll out more policies.

This includes allocating 3.65 trillion yuan (about 575 billion U.S. dollars) of special-purpose bonds for local governments, to boost demands and anchor market expectations.

China’s State Council executive meeting held on Tuesday reiterated the stance that “policies for keeping the economy stable should be introduced whenever possible.

“No policy that adversely affects market expectations will be introduced,’’ while vowing more steps to shore up economic growth.

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