By Gina Lee
Investing.com – Chinese factory activity grew at the fastest pace in more than three years in November, with the services sector also seeing its highest levels in years. The country continues a strong economic recovery, with manufacturing now at pre-COVID-19 levels. China is also poised to become the first to country to completely recover from the effects of the COVID-19 lockdown imposed earlier in the year.
Data released by the National Bureau of Statistics (NBS) showed that the manufacturing Purchasing Managers Index (PMI) grew 52.1% in November, higher than the 51.5% growth in forecasts prepared by Investing.com and October’s 51.4% reading. Meanwhile, the non-manufacturing PMI also outperformed, growing 56.4% in November against the forecast 56% and October’s 56.2% figure.
“The rise in November’s manufacturing PMI, with broad-based improvements across the sub-indices, suggest the recovery momentum in the industrial sector has become more certain,” China Federation of Logistics & Purchasing analyst Zhang Liqun told Reuters.
“But the results also showed inadequate demand is still a common issue facing firms. We need to consolidate the policy support aimed to expand domestic demand,” Zhang added.
China currently leads the pack in economic recovery from COVID-19. The economy is expected to grow around 2% for the full year, its weakest level in over 30 years but still ahead of other major economies.
The growth in the manufacturing PMI indicates a bright future for exports, already the beneficiary of strong overseas demand for medical supplies and electronics products. E-commerce shopping promotions, primarily on Singles Day earlier in the month, also saw strong consumer demand and boosted small and medium firms’ confidence levels.
However, a strengthening yuan and trading partners such as Europe and the U.S. introducing fresh lockdowns to curb a second wave of COVID-19 cases, remain challenges to the recovery. More companies have reported the impact from currency fluctuations, compared with a month ago, NBS senior statistician Zhao Qinghe told Reuters.
“Some firms have flagged that as the yuan continues to rise, corporate profits are under pressure and export orders are declining.” Zhao warned, however, that recovery across the manufacturing industry remained uneven. The PMI for the textile industry stayed below the 50-mark indicating growth, for example.
Meanwhile, the services sector secured a ninth straight month of expansion, the fastest since June 2012, as fewer COVID-19 cases in China increased consumer confidence.
Some of the best performing sectors in November include railway and air transportation, telecommunication and satellite transmission services, and the financial industry.
November's Caixin manufacturing and services PMI are due later in the week.