China’s economic activity rebounds sharply after reopening

CHINA’S manufacturing and services expanded for the first time in four months in January as the reopening from Covid Zero 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 (Jan 31). 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 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 hometowns to reunite with their families. This year, though, marked the first time that people could freely move around the country in years as China abandoned its tough Covid Zero rules in late 2022.

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

A sub-gauge measuring suppliers’ delivery time improved to 47.6 from 40.1. That reflected shorter delays for logistics and transportation.

The pickup in the factory gauge “shows that production and operation has improved”, Zhao Qinghe, senior statistician at the NBS, said in a statement accompanying the 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. 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. The yuan traded offshore was little changed at 6.7589, while the yield on 10-year Chinese government bonds held at around 2.91 per cent.

While holiday travel hasn’t yet recovered to 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 movie theatres 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 weakness in exports and the property sector 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