China's Factory Activity Surpassing Expectation

China's factory activity has grown the fastest scale in more than a decade this February, according to an official index published on Wednesday, March 1, overcoming the challenges caused by COVID-19 last year, as quoted by Reuters.  

China's National Bureau Of Statistics published that the manufacturing purchasing managers index (PMI) goes from 50.1 to 52.6 in January. That was the highest PMI value since April 2012 and surpassed the experts´ forecasts.   

According to Refinitiv Datastream, in December 2022 the mark was below 50, ate a time when Omicron variant infections were spreading rapidly. The 50-point mark separates expansion and contraction in activity and the PMI data are based on monthly surveys for indicators of economic trends, available for over 50 countries.  That means that the activity is growing after the drastic consequences brought by the pandemic.

After being in lockdown for a long time and creating strict measures to stop the propagation of the infection in the country, these results are better than expected, considering that 2022 was one of the worst years for China's economy.   

In 2022, China's economy expanded by 3% in 2022, also according to the National Bureau of Statistics. In 2021, economic growth had rebounded by 8.4% from just 2.2% in 2020.   Fourth-quarter GDP rose by 2.9%, beating expectations from the Reuters’ poll of 1.8% growth.  

"The high PMI readings partly reflect the economy's weak starting point coming into this year and are likely to drop back before long as the pace of the recovery slows," said Julian Evans-Pritchard, head of China economics at Capital Economics, quoted by Reuters.  

China's central bank said the domestic economy was expected to generally rebound in 2023, although the external environment remained "severe and complex." According to CNBC, the average estimate among economists is slightly higher than the expected official target, at 5.21%. Among the more bearish calls is Oxford Economics, with a 4.5% forecast. 

China is now the second largest economy in the world and the surprise with PMI results make global markets more optimistic about Asian stocks.

The Director of the National Bureau of Statistics, Kang Yi, said to CNBC that the global trade situation was not optimistic, and businesses still face many difficulties in production and operation. Yi also cast China’s 3% growth as “relatively fast” in light of unexpected situations and in contrast to Germany, the U.S., and Japan.  

One of the results of this growth was the fall of the U.S. dollar across the board on Wednesday. The dollar lost 0.9% on the euro overnight, on the other hand, China’s manufacturing activity set the yuan on its biggest one-day jump of the year so far.