China’s economic activity rebounds sharply after reopening

China’s manufacturing and services expanded for the first time in four months in January. PHOTO: AFP

BEIJING – China’s manufacturing and services expanded for the first time in four months in January as the reopening from zero-Covid continued and the Chinese New Year holiday spurred travel and spending.

The manufacturing purchasing managers’ index rose to 50.1 from 47 in December, matching economists’ estimates, the National Bureau of Statistics (NBS) said on Tuesday. The non-manufacturing gauge, which measures activity in both the services and construction sectors, increased to 54.4 from 41.6, topping expectations for 52 in a Bloomberg survey of economists.

Numbers above 50 represent an expansion, while anything below that indicates contraction.

Activity usually slows during the Spring Festival, which this year fell during the last full week in January, as businesses close for the holiday and people travel back to their home towns to reunite with their families. This year, though, marked the first time in years that people could freely move around the country as China abandoned its tough zero-Covid rules in late 2022. 

A sub-index measuring services activity alone jumped to 54 from 39.4, suggesting that residents became more willing to travel and spend money during the holiday season after three years of stringent mobility rules.

A sub-gauge that measures suppliers’ delivery time improved to 47.6 from 40.1, reflecting shorter delays for logistics and transport.

The pickup in the factory gauge shows that production and operation have improved, NBS senior statistician Zhao Qinghe said in a statement accompanying the data release. 

There are still many manufacturing and services firms that reported insufficient market demand in January, which is still the biggest problem faced by firms, said the statement, adding that “the economy’s recovery foundation needs to be further solidified”.

The CSI 300 Index was up about 0.1 per cent after the data release, while a gauge of Chinese shares listed in Hong Kong traded 0.9 per cent higher.

While holiday travel has not yet recovered to the pre-pandemic levels of 2019, recent data did show a surge in the number of trips made during the week. Tourist spots were swamped, while cinemas were packed. 

China’s economy will likely improve significantly from 2022’s 3 per cent expansion. The median estimate in a Bloomberg survey for 2023 growth is 5.1 per cent. 

The pace and strength of the recovery remain to be seen. Top leaders have pinned their hopes on a fast rebound in consumption and have vowed to make that a main driver of growth – especially as the property sector and weakness in exports are expected to be drags. 

Beijing will also have an opportunity to announce more stimulus to support growth when it unveils a comprehensive economic blueprint at the National People’s Congress in March. BLOOMBERG

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