Friday, January 28, 2022

Electricity Crisis Eases, Chinese Factory Activities Gradually Improve

Image Credit: Reuters

Official data released Tuesday (30/11) showed that manufacturing activity in China edged up in November. This increase was supported by an easing of electricity shortages and a decrease in the cost of some raw materials.

A gauge of manufacturing activity, the Purchasing Managers’ Index (PMI) in the world’s second-largest economy showed an increase of more than 50 points – the boundary that separates growth and contraction – after two months, at 50.1 points.

The latest data from the National Bureau of Statistics (NBS) also showed a better score than the 49.7-point index predicted by a Bloomberg analyst poll. “The recent series of policy measures to strengthen energy supply guarantees and stabilize market prices have shown results,” NBS senior statistician Zhao Qinghe said in a statement.

He added that the tightening of their electricity supply this month allowed production capacity to increase. Meanwhile, the prices of some raw materials have also fallen significantly.

“With the global economy recovering and the Christmas season approaching, foreign trade continues to improve,” Zhao added.

On the other hand, China’s non-manufacturing PMI showed a slight decline from 52.4 in October to 52.3 points as the Bamboo Curtain country is grappling with a new coronavirus variant outbreak in the country.

Analysts had expected a slowdown in growth after the recent spike in cases in late October, which spread to all 21 provinces and prompted travel restrictions and closures.

Capital Economics said in a report Monday (29/11) that the new variant of Omicron’s Covid-19 will test China’s strict zero-Covid strategy. “If this proves to be more difficult to control than the Delta variant, then officials are expected to tighten containment measures, which will disrupt services even further,” he added.

Meanwhile, one analyst advised reading the latest PMI data carefully. “We don’t think the rebound implies a turnaround in the manufacturing sector,” Lu Ting, chief China economist at Nomura, told AFP. 

He added that factory activity is likely to fall again in December as the Chinese Government begins to limit production in high-polluting sectors to ensure blue skies remain during the upcoming Winter Olympics, which are scheduled to start on February 4, 2022.

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