China’s Economy Rebounds: Factory Activity Signals Stabilisation

• 17 October 2023
• International News
• 2699 Views

China’s economy is showing signs of stabilisation as factory activity expands for the first time in six months. The Purchasing Managers’ Index (PMI), which measures the performance of major manufacturers, rose to 50.2 in September, up from 49.7. This figure is above the critical 50-point threshold, indicating a shift from contraction to expansion. Economists had predicted a reading of 50.0, this was confirmed by Reuters on 30 September 2023.

The improvement in the PMI, the first official data for September, is part of a broader trend suggesting that China’s economy is gradually recovering. Earlier in the year, the economy faced challenges as it emerged from the strict COVID-19 restrictions.

Preliminary indications of recovery appeared in August. During that month, factory output and retail sales saw growth, while declines in exports and imports narrowed, and deflationary pressures eased. In an unexpected turn, industrial firms’ profits surged by 17.2% in August, rebounding from a 6.7% decline in July.

Zhou Hao, chief economist at Guotai Junan International, commented on the situation, saying, “The manufacturing PMI, along with the robust industrial profit figures, suggests that the economy is gradually bottoming out.”

China’s non-manufacturing PMI, which measures the service sector and construction, also showed growth, with a reading of 51.7 in September compared to August’s 51.0.

The composite PMI, which combines both manufacturing and non-manufacturing activities, climbed to 52.0 in September, up from 51.3.

Economists are now closely monitoring consumer spending as China’s longest public holiday of the year, “Golden Week,” unfolds. The holiday started with the Mid-Autumn Festival, followed by the National Day break until 6 October.

In an optimistic start to the holiday period, rail passenger travel reached a single-day record of 20 million trips on Friday 29 September, according to state media reports. Authorities had predicted this to be “the most popular Golden Week in history.”

• Analysis
• Economy and Finance