A rebound in Chinese manufacturing? Keys to stimulus-driven growth
Manufacturing activity in China continues to show signs of recovery, especially among small and medium-sized enterprises, thanks to recent economic stimulus measures implemented by the government.
According to the Caixin/S&P Global Purchasing Managers' Index (PMI), the index reached 51.5 in November, beating the 50.5 expectation in a Reuters poll. This is the second consecutive month that it has remained above the 50 threshold, which separates expansion from contraction.
Boosting new orders and exports
Manufacturing growth was led by a three-year surge in new orders, according to Wang Zhe, an economist at Caixin Insight Group. The report also highlighted a recovery in exports, suggesting stimulus is starting to feed through to the economy.
The official PMI, which mainly includes state-owned companies and large firms, also showed a slight increase, standing at 50.3 in November compared to 50.1 in October. This result underlines an initial stabilisation in the sector.
Economic stimuli and challenges
China has rolled out a series of measures to revive its economy, including cutting the bank reserve requirement ratio by 50 basis points and approving a 10 trillion yuan ($1.4 trillion) plan to address local debt problems.
In addition, efforts have been stepped up to stabilise the real estate sector, which continues to show weaknesses, with a 10.3% drop in investment during the first ten months of the year.
Despite these positive signs, challenges remain. According to Gary Ng, economist at Natixis, a sustained recovery will depend on an improvement in consumer and business confidence. Risks such as price wars and geopolitical tensions are also mentioned, which could impact key sectors in 2025.
Impact of trade tensions with the United States
Donald Trump's recent presidential victory has raised uncertainty about the possible re-implementation of tariffs on Chinese goods. According to Julian Evans-Pritchard of Capital Economics, this threat could be temporarily boosting Chinese exports as US companies seek to get ahead of potential tariffs.
A change of course?
Although recent data suggest a nascent recovery, China’s economic outlook remains mixed, with sectors such as real estate and industrial profits facing significant declines. However, fiscal and monetary stimulus, coupled with increased export demand, could lay the groundwork for a more sustained recovery in 2024.