China's factory activity improves in January, expectations stable

BEIJING -- China's factory activity demonstrated improvement this month as businesses reported robust production and maintained an overall optimistic outlook, adding to the growing evidence that the Chinese economy has gotten off to a positive start this year.

The purchasing managers' index (PMI) for China's manufacturing sector came in at 49.2 in January 2024, up from 49 in December last year, official data showed Wednesday.

The figure rebounded after a three-month decline which started in October 2023, indicating an improvement in manufacturing activity, according to data released by the National Bureau of Statistics (NBS). The PMI for December, November and October was 49, 49.4 and 49.5, respectively.

A reading above 50 indicates expansion, while a reading below 50 reflects contraction.

The recovering PMI indicates an increase in supportive factors for the economy, contributing to its stability, said Zhang Liqun, a special analyst with the China Federation of Logistics and Purchasing, noting that authorities have stepped up efforts to bolster the economy since the beginning of the year.

NBS senior statistician Zhao Qinghe said factories saw accelerated production and an increase in new orders this month, while their expectations remained stable in January.

Driven by a robust food and beverage sector, entertainment, and medicine production, the sub-index measuring manufacturing production climbed to a four-month high. Export orders registered major improvement, reflecting the recovering external demand, and new orders for equipment and high-tech manufacturing, as well as consumer goods, continued to expand.

The business outlook largely remained stable, with the expectations of medicine, auto, and railway and shipping equipment producers persisting in high-climate territory.

Large enterprises saw their PMI return to the expansion zone, while medium-sized companies improved but were still in contraction terrain. The situation remained lackluster for small firms.

Wednesday's data also showed that the country's non-manufacturing activity, specifically in services and the construction sector, accelerated expansion in January with the PMI standing at 50.7, up from 50.4 in December.

The early January holiday boosted people's willingness to travel and spend money, which prompted increased activity levels in the retail, road transport, air transport and catering sectors, according to Zhao.

Concluding 2023 with an impressive 5.2 percent increase, the Chinese economy commenced the new year on a positive note.

A warm sentiment pervaded the entire country, evident in bustling tourist attractions and long queues at restaurants. During the three-day New Year holiday, China's tourism revenue exceeded pre-pandemic 2019 levels, and box office sales hit a record high. The upcoming Spring Festival is expected to usher in another surge in trips and sales.

However, experts still cautioned against difficulties and challenges facing the economy, including a lack of effective demand and weak social expectations. More efforts are needed to drive domestic demand through government investment in a bid to promote the upward trend of the economy, Zhang said.