China’s manufacturing SMEs have struggled to recover and are still struggling in the downturn

WASHINGTON — 

China’s factory activity accelerated in January, but the industry as a whole remained in contraction, according to the manufacturing purchasing managers’ index released by Chinese financial media Caixin on Wednesday (Feb. 1).

The Caixin Manufacturing Purchasing Managers Index (PMI) recorded 49.2 in January, an increase of 0.2 percentage points from the previous month (December last year). 49.5 predicted by social experts.
A reading above 50 indicates that the industry is expanding, while a reading below 50 indicates that it is in contraction.

The latest data from Caixin was weaker than the January manufacturing purchasing managers’ index released by China’s National Bureau of Statistics on Tuesday. The PMI figure of the National Bureau of Statistics was 50.1, an increase of 3.1 percentage points from the previous month, returning to the expansion range after a lapse of three months.

The National Bureau of Statistics and Caixin are the compilers and publishers of China’s two manufacturing PMIs. The former focuses on large state-owned enterprises, while the latter focuses on small and medium-sized enterprises and coastal enterprises. Economists use these two data to understand the latest changes in the manufacturing industry.

Reuters quoted Julian Evans-Pritchard, an analyst at the London-based economic research firm Kay Macro, as saying, “The weaker Caixin index means that small companies and exporters are facing lower foreign demand. encountered very serious difficulties.”However, analysts believe that the economic downturn after China abandoned its anti-epidemic policy in early December last year seems to have passed, and the speed of the epidemic tsunami was surprisingly fast.

Analysts at Nomura Securities, a Japanese securities brokerage, said that they are also updating their expectations for China’s economic growth prospects based on the latest data. be quick.

China’s manufacturing SMEs have struggled to recover and are still struggling in the downturn

In the fourth quarter of 2022, China will be in a chaotic period of severe dynamic clearing and disorderly unblocking. However, China’s official data showed that in that quarter, China’s GDP still grew by 2.9%. The authenticity of this data has been widely questioned.

China, the world’s second-largest economy, rebounded in the first and second quarters of the year, analysts said, but in the long run, problems in the real estate sector and weak foreign demand will pose a long-term threat to the Chinese economy. dragged down.Caixin reported that with the improvement of the epidemic situation, the supply chain has become more stable, and the supplier supply time index has risen sharply in January, which means that the pressure on the supply chain has slowed down. However, due to the shortage of manpower, logistics and transportation Not fully normalized yet.

Wang Zhe, a senior economist at Caixin Think Tank, said that the negative impact of the epidemic on the economy will still exist in January 2023. Supply and demand are weakening, external demand is sluggish, unemployment has risen sharply, and logistics has not yet fully recovered, but the optimism of manufacturing companies continues to increase. .

The National Bureau of Statistics of China reported on Tuesday that the PMI in November last year was 48%, and it was 47% in December. Zhang Aoping, president of the China Increment Research Institute, pointed out that although the situation has improved, it is not yet stable. Although the production index increased by 5.2 percentage points in January, it is still in a state of contraction (49.8%).The biggest problem is weak external demand. The new export orders index rebounded slightly in January, rising to 46.1% from 44.2% in December, but there is still a considerable distance from expansion.

In addition, the PMI of large enterprises increased by 4 percentage points from the previous month, which was higher than the threshold, while the PMI of small and medium enterprises was still only 48.6% and 47.2%, both below the threshold. Zhang Aoping said that the weak self-repair ability of SMEs’ balance sheets is the key obstacle to the current endogenous economic recovery.