China manufacturing rebounds as economy shakes off coronavirus, Caixin PMI shows

caixinglobal.com General 2020-06-01 11:16:55

Manufacturing activity in China rebounded in May driven by a jump in output as companies resumed production after the coronavirus lockdown in the first quarter, indicating the nation's recovery from the pandemic is gathering pace.


The Caixin China General Manufacturing Purchasing Managers' Index (PMI), which gives an independent snapshot of the country's manufacturing sector, rose to 50.7 from 49.4 in April, a report released on June 1 showed. A number above 50 signals an expansion in activity, while a reading below that indicates a contraction.


The PMI reading was the highest since January, before the Covid-19 outbreak took hold in the country, and adds to evidence the country's vast manufacturing sector is regaining momentum after economic data for April — including fixed-asset investment, industrial output and retail sales — showed the slump in the first quarter is being reversed. Gross domestic product (GDP) fell by 6.8% year-on-year in the first three months of 2020, the first quarterly drop since records began in 1992.


Premier Li Keqiang on May 28 emphasized the government's determination to achieve economic expansion this year even though it has abandoned setting a GDP growth target for the first time since 2002. "If our key targets, including protecting jobs, livelihoods and market entities can be achieved, we will be able to achieve economic growth this year, and we will strive to achieve a quite substantial growth rate to drive China's economy," Li said at a press conference in Beijing on Thursday at the end of the annual session of the National People's Congress (NPC).


The breakdown of the PMI showed the improvement in the headline number was driven by production, with the output subindex reading rising to its highest since January 2011. That was partly a reflection of efforts by companies to rebuild inventories as the gauge of finished goods stocks fell below 50. Manufacturers' confidence also improved, with the gauge of business expectations showing a sharp recovery to just below March's level after a large decline in April.


However, other components of the index showed demand overall remains subdued. New orders contracted for the fourth straight month although the subindex reading improved to just below the 50 mark, and the slump in export orders continued, weighting on overall demand. A lack of new work led to the first contraction in backlogs of orders since February 2016, the survey showed.


Export drag

"Supply was generally stronger than demand in the manufacturing sector, as production continued its expansion amid a broader economic rebound while demand had yet to recover," Wang Zhe, a senior economist at Caixin Insight Group, said in the report. "Sluggish exports remained a big drag on demand as the virus continued spreading overseas."


Data from the customs bureau showed goods exports unexpectedly rose in April after a three-month decline as companies cleared backlogs of orders that had built up during and after the domestic lockdown. But economists have warned that the rebound is unlikely to last as global demand will remain weak at least in the short term because of the pandemic.


Although the employment index in the PMI showed the highest reading since January, it remained below 50 for the fifth straight month, underscoring the government's concern about the potential for a rise in unemployment. Premier Li said on Thursday that efforts to stabilize employment will be stepped up and the government will take all possible measures to secure existing jobs.


"Stabilizing the job market is a top priority on policymakers' agenda this year, as shown in last month's government work report," Wang said. "Boosting employment is not an easy task."


As part of the government's program to bolster the economic recovery and create jobs, Li unveiled an additional stimulus and relief package in his work report to the NPC, with a focus on helping businesses and individuals while also support investment.


The overall budget deficit is targeted to increase by 36% to 3.76 trillion yuan ($527 billion), and the central government will issue 1 trillion yuan of "anti-pandemic" special treasury bonds to fund the relief package, according to the government work report. It will also allow local governments to issue 3.75 trillion yuan of special-purpose bonds for infrastructure investment, almost 75% higher than 2019's figure.


Relief policies "are not focused on large infrastructure projects," Li said at the press conference. "This is because big changes have taken place in China's economic structure, where consumption is now the primary engine driving growth," he said.


(Writing by Alex Guo  Editing by Tammy Yang)
For any questions, please contact us by inquiry@fwenergy.com or +86-351-7219322.

Share this article
Connect with us

Editors Recommendations

1 China Coal Daily Track (Jul 8) 2020-07-08

Thermal coal Production area Coal supply remained tight in Shaanxi and Inner Mongolia. While the number of trucks waiting outside mining fields fell slightly, the overall demand for slack coals

2 Huaneng says to strictly control spot purchases of domestic thermal coal 2020-07-08

China's state-owned power giant Huaneng Group said in a notice issued on July 7 that it will tighten the screw on spot purchases of domestic thermal coal, given the benchmark price has been rising rap

3 Chinese thermal coal market climb fast on robust demand 2020-07-07

Chinese thermal coal prices continued growing at a fast pace at northern transfer ports, as utilities are frequently issuing tenders for the summer peak demand period. On July 7, offer pr

4 China coking coal buying interest tapers after coke prices fall 2020-07-07

Chinese coke producers started to diminish coking coal procurement after several leading steelmakers lowered purchasing prices of coke, signaling an end of consecutive rises in the coke sector since e

5 Indonesian thermal coal demand weakens in SE Asia markets after China, India 2020-07-07

Thermal coal of Indonesia, a major global supplier, seems to be losing its emerging Southeast Asia markets after top buyers China and India shifted to domestic supply amid Covid-19 pandemic woes.

6 China Coal Daily Track (Jul 7) 2020-07-07

Thermal coal Production area Both supply and demand have improved in Inner Mongolia and other key production areas since the start of this month In Inner Mongolia, coa

7 China's 2020 power demand to gain over 1.5%: analysis report 2020-07-07

China's power consumption is expected to reach 7.33-7.48 trillion kilowatt hour (KWh) in 2020, an increase of 1.5% to 3.5% from 2019's consumption, factoring in coronavirus, financial policies, the sw

8 China steel plates strong while rebar weak in late Jun 2020-07-07

As the rainy season in southern China restricted the demand for construction steel, rebar and wire rod prices ran weak in late June, according to the latest data from the National Bureau of Statistics

9 Myanmar becomes top market for Chinese cos to track power projects in H1 2020-07-07

Out of 144 overseas power projects Chinese companies participated in over the first half of 2020, 27 projects are located in Myanmar, accounting for 18.8% of total, making the southeastern Asian count

10 Huadian Coal Industry H1 profits rise 23% YoY 2020-07-07

Despite hardships and headwinds due to the outbreak of COVID-19 in China, Huadian Coal Industry under China Huadian Corporation has achieved encouraging results in the first half of 2020, according to

Most Read Articles

1 CHN Energy Jul term contract prices reach new high so far this yr 2020-07-02

China's top coal mining group China Energy Investment Corporation, or CHN Energy, raised its monthly term contract prices of thermal coal for July delivery to a new high so far this year, market sourc

2 China coal mine safety watchdog warns of possible floods at mines 2020-07-03

China's National Coal Mine Safety Administration warned of possible floods at coal mines alongside persistently strong rainfalls in South China and Southwest China. Entering the rainy sea

3 Indonesia sets Jul coal HBA price at lowest in 4 yrs 2020-07-03

The Indonesian government set its coal benchmark price (HBA) for July at $52.16/t, down from $52.98/t last month, the Energy and Mineral Resources Ministry said in a statement on July 3.

4 China's thermal coal prices climb quickly on bullish outlook 2020-07-03

Thermal coal prices moved up rapidly at northern Chinese ports late this week, on the back of revived market confidence for higher buying demand and tight supply. Prevailing offers for 0.

5 Customs authorities suspend coking coal clearing at N port on quota shortage 2020-07-02

Chinese customs temporarily stopped customs clearing services for coking coal imports at Jingtang port in northern China's Hebei province, as its quotas for the whole 2020 have been almost used up, so

6 Chinese steel market bracing for slack demand season 2020-07-02

Chinese steel market is bracing for typically slack demand season, alongside rising steel stockpiles and slightly contracted demand, said Ge Xin, vice director of Lange Steel Research Center.

7 Japan seeks to suspend or retire 90% of dirty coal-fired plants 2020-07-02

The Japanese government is looking to suspend or shutter nearly 90% of its older, inefficient coal-fired power plants by fiscal year 2030 in what would be a major turning point for the country's energ

8 Supply woes spur buying interest of thermal coal at N China ports 2020-07-02

Buying appetite of spot thermal coal was seen notably higher at northern China ports, spurred mainly by supply shortage at main production provinces and CHN Energy's upward July term contract prices.

9 Coal stocks update suspended for China's six coastal power groups 2020-07-06

Updates on coal stocks and consumption of China's six major coastal power groups are temporarily suspended, after China Huaneng Group, China Huadian Group and China Datang Corporation were said not to

10 Indonesian low-CV coal prices fall below $24/t; downward pressure remains 2020-07-03

Offer prices of Indonesian thermal coal prices nudged lower on July 3 in the Chinese seaborne import market due to the poor demand curbed by a lack of import quotas. Market participants surmised the d

Scan to download sxcoal.com mobile APP

X