China’s factory activity fastest in 3 years, to become first country to shake off COVID drag

Covid-19 may have rattled businesses across the world but it seems China is racing ahead of all the countries to come out of the slump and expand its industrial activity at a much larger pace than before.

On Monday, reports said that China’s factory activity expanded at the fastest pace in more than three years in November, while growth in the services sector also hit a multi-year high, as the country’s economic recovery from the coronavirus pandemic stepped up.

According to a report by Reuters, data released on Monday suggests the world’s second-largest economy is on track to become the first to completely shake off the drag from widespread industry shutdowns, with recent production data showing manufacturing now at pre-pandemic levels.

China’s official manufacturing Purchasing Manager’s Index (PMI) rose to 52.1 in November from 51.4 in October, data from the National Bureau of Statistics showed. It was the highest PMI reading since September 2017 and remained above the 50-point mark that separates growth from contraction on a monthly basis. It was also higher than the 51.5 median forecast in a Reuters poll of analysts.

“The rise in November manufacturing PMI, with broad-based improvements across the sub-indices, suggest the recovery momentum in the industrial sector has become more certain,” Zhang Liqun, analyst at China Federation of Logistics & Purchasing.

“But the results also showed inadequate demand is still a common issue facing firms. We need to consolidate the policy support aimed to expand domestic demand.”

China’s blue-chip stock market index hit a 5-1/2 year high following the brisk data.

The robust headline PMI points to solid fourth-quarter growth, which analysts at Nomura expect to quicken to 5.7% year-on-year, from 4.9% in the third quarter, an impressive turnaround from the deep contraction earlier this year.

The economy is expected to expand around 2% for the full year, the weakest in over three decades but still much stronger than other major economies that are struggling to bring their coronavirus outbreaks under control.