China factories report a surge in activity after lockdowns end End-shutdown

After being brutally hit by the coronavirus pandemic last year, Chinese factories bounced back with unexpected vigor last month.

The official manufacturing activity index, based on surveys of purchasing managers at companies in China, spiked in February from the previous month to its highest level in more than a decade. The service sector activity index also rose. Both measures suggested that business had expanded for the second month in a row, after contracting during the Covid restrictions.

After a year of relentless lockdowns, quarantines and coronavirus testing that brought much of the country to a standstill, Beijing lifted the restrictions without warning in early December. The abrupt change in policy resulted in a rampage of infections, and rough estimates suggest that up to 1.5 million people have died in the wave of covid. But it also freed up the economy to begin a revival.

“Overnight we have seen a decent turnaround in risk momentum as upbeat data from China has reignited optimism for the reopening of trade that has been flagging of late,” Deutsche Bank analysts wrote after the announcement. publication of statistics. The Hang Seng stock index in Hong Kong rose more than 4 percent on Wednesday.

The upbeat news came just days before China’s leaders meet for the annual meeting of the National People’s Congress.

China is the world’s second-largest economy, after the United States, but its manufacturing capacity is gigantic, producing more of the world’s industrial output than the United States, Germany, and Japan combined.

The health of China’s economy has implications for other economies. “China’s economic revival, coming after disruptions caused by the zero-covid policy and then its abrupt reversal, bodes well for the outlook for the global economy this year,” said Eswar Prasad, a professor of trade policy. at Cornell.

China’s economic growth rate of 3 percent in 2022 was one of its worst results in nearly half a century. Economists expect growth to pick up this year, with the International Monetary Fund forecasting a 5.2 percent expansion. Investors betting on a recovery have pushed Chinese stocks higher this year.

Manufacturing data released on Wednesday further fueled some analysts’ optimism: schroders, an investment manager, raised his forecast for economic growth in China this year to 6.2 percent, from 5 percent.

But the damage from three years of China’s “zero covid” policies will take time to heal. Prolonged lockdowns forced small businesses to close permanently, and large-scale testing hit government finances.

Analysts at Mitsubishi UFJ Morgan Stanley noted that China’s national statistics office warned that demand remained weak. It may become clear this weekend whether the political leadership decides to offer support that would prop up private companies, the declining real estate sector and investment in infrastructure.

Despite the weaknesses, recent news suggested that China could experience relatively good growth this year, Cornell’s Prasad said. She added that the latest figures will “relieve some of the pressure on the country’s leaders to announce major stimulus measures at the next meeting of the National People’s Congress.”

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