China’s Manufacturing Is Back in Expansion

China's factory activity unexpectedly returns to growth in November

Factory activity in China unexpectedly returned to growth in November for the first time in seven months, as domestic demand picked up on Beijing's accelerated stimulus measures to steady growth.

On top of that, according to Saturday's (November 30th) National Bureau of Statistics data, the Purchasing Managers' Index (PMI) for factory activity rebound to 50.2 in November from an earlier reading of 49.3 in October, beating an analysts' estimate of 49.5 and remarking its highest level since March this year. It stayed well above the 50-point mark that separates growth from contraction. Tom Mackenzie reports on "Bloomberg Daybreak: Australia".

But business confidence slipped and companies were reluctant to replenish their inventories, anxious about the uncertain outlook for demand and the prolonged China-US trade war. "But it remains to be seen whether the trend will be sustainable, as the risk of weakening demand still exists", said Liu Xuezhi, a senior researcher at the Bank of Communications' Financial Research Center. This will continue to give support to new orders in the coming year.

High-tech manufacturing and the manufacturing of equipment and consumer goods also saw expansion over two consecutive months, showing that the economy is on a transformative track toward high-quality growth and a consumption-driven model, Zhao said. Some analysts say that could be a sign that the government is anxious about the downward economic pressure.

A sub-index of new export orders climbed to a seven-month high at 48.8, but was still in contraction as demand wanes for China's exports overseas.


An additional 15% in United States tariffs are scheduled to take effect on about $156 billion of Chinese products on December 15.

The PMI survey also indicated factories continued to cut jobs in November despite slightly improved business confidence, while it signalled a further deterioration in profits for Chinese manufacturers, with output prices falling into a three-month low.

The country's monetary policy has become more accommodative to prevent a broader economic slowdown, with a focus on guiding more bank lending to smaller and private businesses.

NBS data also shows that the PMI for China's non-manufacturing sector came in at 54.4 in November, the highest since April, up from 52.8 in October, indicating that the non-manufacturing industry maintained its overall expansion momentum.

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