China’s economic recovery ‘on track’ as services activity hits 12-year high in March

beijingwalker · Mar 31, 2023

China’s economic recovery ‘on track’ as services activity hits 12-year high in March

China’s official manufacturing purchasing managers’ index (PMI) fell to 51.9 in March from 52.6 in February

The non-manufacturing gauge, which measures business sentiment in the services and construction sectors, rose to 58.2 in March from 56.3 in February

Andrew Mullenand Mia Nulimaimaiti
Published: 9:42am, 31 Mar, 2023

Expansion in China’s factory activity slowed in March, data released on Friday showed, while business sentiment in the services and construction sectors hit a 12-year high.

The official manufacturing purchasing managers’ index (PMI) beat expectations but still fell to 51.9 in March, down from 52.6 in February, according to the National Bureau of Statistics (NBS). Chinese data provider Wind had predicted a drop to 50.5.

The official non-manufacturing PMI, which measures business sentiment in the services and construction sectors, rose to 58.2 in March from 56.3 in February. After expanding for a third consecutive month, the non-manufacturing PMI reached its highest level since May 2011.

The official composite PMI, which includes both manufacturing and services activity, rose to 57 in March, up from 56.4 in February.

“In March, influenced by factors such as the high base of the previous month, the manufacturing PMI fell, with the prosperity level still at its second highest point for the past two years, and 13 of the 21 industries surveyed had a PMI higher than the previous month,” said senior NBS statistician Zhao Qinghe.

“In March, the non-manufacturing index of business activity stood at 58.2 per cent, up 1.9 percentage points from the previous month – a high point in recent years – as the non-manufacturing sector resumed its development at a faster pace.

“In March, the composite PMI output stood at 57 per cent, up 0.6 percentage points from the previous month, continuing its upwards trend in the higher booming range, which indicates that the overall production and operation of China’s enterprises continues to improve.”

Within the official manufacturing PMI, the new orders subindex fell to 53.6 in March, down from 54.1, while the new export orders subindex fell to 50.4 from 52.4.

The expansion of service sector activities is particularly strong, as the PMI for the service sector soared to the highest level in the past decadeZhang Zhiwei

“The PMI indicates China’s economic recovery is on track. The expansion of service sector activities is particularly strong, as the PMI for the service sector soared to the highest level in the past decade,” Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

“The strong momentum will likely continue in the coming months, as the new order index for the service sector continued to rise. We witnessed many policy actions to boost confidence, such as the reserve requirement ratio] cut, the [medium-term lending facility] injection, and the gestures from the leaders on promoting private investments. These policy actions will help the economy to keep the strong momentum. We think [gross domestic product] growth may surpass 6 per cent this year.”

On Thursday, Premier Li Qiang tried to assure the rest of the world that the Chinese economy was recovering and his cabinet was addressing systemic risks – “especially to ensure a steady financial market” – after trouble at Silicon Valley Bank and Credit Suisse sent shock waves through global financial markets.

“China’s economic growth momentum is strong,” he told the Boao Forum for Asia.

“March has been even better than the first two months. Notably, market expectations have improved markedly as indicators like consumption and investment have become better, while job market and consumer prices remained stable.”