By Jonathan Cheng
BEIJING--Gauges of China's manufacturing and nonmanufacturing
activity climbed to their highest levels in three and eight years,
respectively, signaling a broadening recovery in the world's
second-largest economy nearly a year after the coronavirus began
its spread.
The official manufacturing purchasing managers index, a key
measure of factory activity, rose to 52.1 in November from 51.4 in
October, according to data released Monday by the National Bureau
of Statistics. The reading is the highest since September 2017 and
topped economists' expectations for the index to edge up to 51.5
this month.
Meanwhile, China's nonmanufacturing PMI, which includes services
and construction activity, rose in November to 56.4, its highest
level since June 2012, from a previous reading of 56.2 in October,
the statistics bureau said.
China's industrial sector has led the nation's economic recovery
since the second quarter of the year, and the official
manufacturing PMI has remained above the 50 mark, which separates
month-to-month activity expansion from contraction, since March.
Now, with the coronavirus staying broadly under control within
China's borders, life is returning to normal in there, which has
helped the other major segment of the economy--services--to catch
up.
"A lot of restaurants are already full with long lines at the
door. People are consuming and factories are already at their full
capacity," said Zhu Chaoping, a Shanghai-based global market
strategist for J.P. Morgan Asset Management. The reason, he says:
"We see the pandemic is controlled."
Overall domestic consumption in China benefited as well in
November from an annual shopping event, known as Singles Day, that
broke its annual sales record this year after e-commerce company
Alibaba Group Holding Ltd. extended the period of discounting.
Monday's manufacturing data showed strength beneath the headline
number. The subindex measuring production increased to 54.7 from
53.9 in October while total new orders, the gauge's main driver,
rose to 53.9 after remaining unchanged for two months at 52.8. And
the export-orders component increased to 51.5 in November, up from
51.0, remaining above the 50 mark for three straight months.
Mr. Zhu said he sees room for China's manufacturing strength to
continue in the coming months, pointing to indicators suggesting
that inventories are being depleted, which he said could lead to "a
wave of restocking." Mr. Zhu was also encouraged by a small uptick
in the manufacturing PMI's employment subindex, which points to
factories hiring more employees to keep up with demand.
China's export machine, the main driver of the country's
economic recovery, has beaten economists' gloomy expectations
repeatedly this year. Outbound shipments from China rose 11.4% in
October from a year earlier.
Zhao Qinghe, an economist with China's statistics bureau, said
the country's trade sectors continue to recover but noted that some
enterprises were worried about the recent sustained appreciation of
the yuan, which is squeezing corporate profits and hurting export
orders.
Some private economists are also worried about how long China's
export advantage will last as the prospect of effective vaccines
soon becoming available in developed economies turns spending in
Western countries away from imported goods and toward domestic
services.
"An end to lockdowns and a revival of spending on services in
major export markets will take the wind out of China's recent
export boom," Mark Williams, chief Asia economist at Capital
Economics, told clients in a note last week.
Mr. Zhu, of J.P. Morgan, by contrast, said a widely available
vaccine could help boost China's factory sector, since it could
keep Western economies humming more generally, increasing demand
for Chinese goods. Inventories in the developed world, he added,
are also running low, potentially prompting a wave of restocking
that would benefit Chinese manufacturers.
"After a vaccine is on track, consumer confidence will be much
higher and can support demand from China," Mr. Zhu said.
As the economy picks up steam, Beijing policy makers are
considering the unwinding of stimulus policies introduced earlier
this year to offset the impact from coronavirus lockdowns. China
will maintain a "normal" monetary policy as long as possible, the
People's Bank of China said in a report last week, wording that
many experts say points to a return to the central bank's
pre-coronavirus focus on reining in risk.
Since Beijing didn't set an explicit growth target for 2020 and
with the recovery looking strong, policy makers see no need to step
up their stimulus, Larry Hu, an economist of Macquarie Capital
Ltd., told clients in a note Friday. At this stage, China's
monetary policy can best be described as "tapering" or
"normalization," Mr. Hu said, though he also warned: "But policy
could move to 'tightening' sometime next year."
Bingyan Wang contributed to this article.
Write to Jonathan Cheng at jonathan.cheng@wsj.com
(END) Dow Jones Newswires
November 30, 2020 00:16 ET (05:16 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.