China manufacturing activity surges in February

BEIJING: China’s manufacturing activity surged to its highest reading in more than a decade in February, official figures showed Wednesday, as factories began to return to normal following years of Covid-19 disruption.

The world’s second-largest economy is stirring back to life after Beijing’s decision in December to abruptly drop its strict health measures, which mandated strict lockdowns, travel restrictions and mass testing.

February’s figures reflected the subsiding of case numbers after a surge that began in December, coupled with the return to work after the Lunar New Year holiday.

The official manufacturing purchasing managers’ index (PMI) — a key gauge of Chinese factory output — stood at 52.6 in February, compared with 50.1 a month earlier, the National Bureau of Statistics (NBS) announced.

The reading, the highest since 2012, surpassed expectations, with analysts surveyed by Bloomberg having predicted a much less marked increase to 50.6.

“With the effect of the holidays… and the repercussions of the epidemic fading away, the recovery of production by manufacturing companies accelerated and demand continued to rise,” said NBS statistician Zhao Qinghe.

“The strong PMI confirms the economic recovery is on track,” Zhiwei Zhang from Pinpoint Asset Management wrote in a note, adding he expected to see macro data further improve over the next few months.

“The strong rebound of domestic demand may lead to inflationary pressure in the next few months, but I don’t expect it to be a persistent problem,” he said.

The growth trend was confirmed Wednesday by the independent PMI index by IHS Markit for China’s Caixin media group, which stood at 51.6 in February, compared with 49.2 the previous month.

The Caixin survey, which covers small and medium-sized enterprises, is seen by some as a more accurate reflection of China’s economic situation than official figures, which more closely track large state groups.

It said employment rose, pressure on supply chains eased and delivery times improved for the first time in eight years.

“The return to a more normal business situation and the expected increase in customer demand means that business confidence for the year ahead is at its highest level for 23 months,” it added.

More clues about China’s economic health are expected to be revealed on Sunday when the annual session of the National People’s Congress (NPC), China’s parliament, opens in Beijing.

Premier Li Keqiang will present the last government report of his term in office.