By Jonathan Cheng
BEIJING--Chinese workers returned to factory floors in March,
but operations remained slow due to sluggish demand, dampening
hopes for a speedy recovery as the coronavirus pandemic continues
to paralyze the global economy.
Chinese factory activity expanded in March, following sharp
contractions in January and February, when Beijing locked down much
of central Hubei province and took other drastic measures to
contain the virus. However, smaller companies appeared to lag
behind larger companies, many of them state-owned enterprises, in
the recovery, according to new private and official surveys of
China's manufacturers.
The Caixin China manufacturing purchasing managers index, which
is tilted toward smaller private manufacturers, rose to 50.1 in
March from 40.3 in February, Caixin Media Co. and research firm
Markit said Wednesday. The March result is just above the 50 mark,
which separates contraction from expansion.
A day earlier, on Tuesday, China's official manufacturing PMI,
which focuses more on larger state-owned companies, showed a jump
to 52.0 in March from a record low of 35.7 in February.
Though the official survey of 3,000 manufacturers, which is
conducted by the National Bureau of Statistics, covers a much
larger sample size than the private Caixin survey's 500
manufacturers, the surveys for the most part paint a similar
picture of the broader trend. Both surveys recorded their lowest
readings in February.
The bounceback in the March readings offered some hope for the
economy, said Yang Weixiao, an economist at Founder Securities,
though there is still cause for concern after such a severe
disruption to industrial activity.
"The good news is that things are recovering; the bad news is
the recovery path ahead of us is going to be slow and long," Mr.
Yang said.
That is especially true for China's smaller businesses, which
will likely struggle more to recover from the coronavirus shock
than their larger competitors, since Chinese lenders have long
favored larger companies with state ties, which are seen as more
reliable borrowers, Mr. Yang said.
The March data also highlighted a new challenge for China's
manufacturing sector: Even as the tapering off of new coronavirus
cases in China allowed for some business activity to resume,
worsening external demand and soft domestic consumer spending are
emerging as longer-run concerns and keeping a lid on production,
said Zhong Zhengsheng, an economist at CEBM Group, in a statement
accompanying the release of Wednesday's manufacturing data.
Subindexes measuring production in both the official and private
manufacturing surveys rose in March from the previous months. But
new export orders, a measure of external demand, still showed
contraction in both surveys.
Wang Liping, sales representative for a smaller private
steel-product maker in southeastern Zhejiang province, said her
company started resuming manufacturing its products, which include
rolled steel plates, on Feb. 14--making it one of Zhejiang's first
enterprises to come back online.
Even so, Ms. Wang said the company was still struggling to
deliver on its orders.
"Internally, for our workers and staff, we have resumed normal
working conditions, but externally, things like supplies, sales and
logistics are only gradually getting back to normal," she said.
Suppliers of raw materials, especially hot rolled steelmakers,
couldn't guarantee delivery in the first quarter of the year,
making it difficult for her company to deliver its products on
time. Also, many ocean shipping firms were only just restarting
their services. All those issues need to be dealt with slowly, she
said.
Beijing policy makers concerned about the coronavirus's hit on
employment in the manufacturing sector have been offered a mixed
picture.
A subindex in Wednesday's data release measuring employment
signaled a continued reduction in head count across the industry in
March, though the rate of decline was slower than in February,
Caixin said, pointing to a combination of workers voluntarily
leaving and employers seeking to cut costs.
A day earlier, the official PMI release showed employment
climbing out of contraction territory for the first time in three
years.
To counter the shocks from the deadly virus and anticipating
worse times, Beijing has in recent weeks rolled out measures
including tax cuts and cheaper loans to support the economy.
On Tuesday, China's State Council, or cabinet, said it would
offer fresh funds for banks to lend and let local governments issue
more bonds. To stimulate consumption, the cabinet also vowed to
extend subsidies and tax waivers for purchases of electric vehicles
for two more years in a bid to boost auto sales.
Despite the measures, economists widely forecast the Chinese
economy to post a year-over-year contraction in the first quarter,
a scenario unseen since the days of the Cultural Revolution from
the mid-1960s to mid-1970s.
Such a pullback would complicate Beijing's year-end goal of
doubling the overall size of the economy from a decade earlier.
Economists say a growth rate of roughly 5.5% in 2020 is needed for
Beijing to meet that goal.
Liyan Qi contributed to this article.
Write to Jonathan Cheng at jonathan.cheng@wsj.com
(END) Dow Jones Newswires
April 01, 2020 03:20 ET (07:20 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.