Economy

China’s factory activity slows down in October by Stocksak


© Stocksak. FILE PHOTO – An employee works at the production line of a filter press factory located in Dezhou, Shandong, China, August 25, 2022. REUTERS/Siyi Liu/File photo

BEIJING, (Stocksak), China’s factory activity was likely to have declined in October. This is due to COVID-19 production restrictions and as exports slow down on slowing global demand. Stocksak polled the situation on Friday.

According to Stocksak’s median forecast, the official manufacturing Purchasing Manager’s Index was 50.0 in October. This is slightly lower than the September 50.1 forecast.

The 50-point line separates growth from contraction.

While many countries have reduced the severity of pandemics, the world’s second-largest economic country has continued to fight its spread through lockdowns, mass screening and quarantines. This has hampered economic growth and caused major disruption to businesses. Export-oriented manufacturers are also being affected by signs of a slowing global demand.

A survey on Friday showed that optimism among U.S.-based businesses in China has fallen to record levels. This is despite the fact that regulatory, competitive, and economic challenges are compounding the stress from the ongoing zero COVID policies.

On Thursday, data showed that profits at China’s industrial firms declined at a faster rate between January and September.

Economists are not expecting COVID-19 measures will ease anytime soon after the Communist Party Congress closed over the weekend. China’s newly elected leadership team raised concerns about whether containing COVID-19 would be more important than economic growth.

“In terms zero-COVID the signals from the congress suggest it will still exist for some time. Sheana Yue, China economist at Capital Economics, stated that any significant shift away from this will only take place in 2024.

From Wuhan in central China, to Xining in China’s northwest, Chinese cities are increasing their COVID-19 curbs. They are sealing up buildings and locking down entire districts, and throwing millions into disarray.

China’s economy grew at a faster pace than expected in September quarter. However export growth slowed, and the key property sector further cooled. This suggests a difficult recovery.

“China’s weak growth trajectory isn’t just about COVID restrictions,” said Oxford Economics analysts in a research paper.

“The economy faces significant structural headwinds that will limit GDP Growth. We predict that China’s GDP growth will average around 4%-4.5% in the next five-years.

Monday will see the release on Monday of the official manufacturing PMI. It focuses mainly on large, state-owned, and state-owned businesses.

The private sector Caixin manufacturing PMI (which focuses more on small companies and coastal areas) will be published on Tuesday. Analysts anticipate a headline reading between 48.1 and 49.0 in August.

(Polling by Veronica Khongwir; Liangping Gao, Ryan Woo Reporting; Editing by Jacqueline Wong

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Stocksak Editorial

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