China's private Caixin manufacturing purchasing managers' index (PMI) rebounded at the end of 2021 due to accelerated production and easing inflationary pressure, a survey released by Caixin showed on Tuesday.
According to the survey, in December, China's Caixin PMI rebounded back into expansion territory of 50.9 percent, beating market expectations of 50 percent and rebounding from last month's 49.9 percent, showing that manufacturing and business activities are improving.
This reading was in line with the manufacturing PMI released by the National Bureau of Statistics, which tracks a wider scope of companies, recording 50.3 percent in December, up 0.2 percentage points from November.
"As the majority of surveyed enterprises for the Caixin PMI are small and medium-sized enterprises (SMEs), this reading showed that the overall production and operational conditions of industrial enterprises continued to improve, as the country has ramped up efforts including the implementation of a 50 basis-point universal cut in the reserve requirement ratio for financial institutions, in order to back up SMEs," Cong Yi, a professor from the Tianjin University of Finance and Economics, told the Global Times on Tuesday.
Wang Zhe, a senior economist from Caixin, said that the manufacturing industry recovered in December, with improved supply and demand as well as eased inflationary pressure, but the employment market remains under pressure with weakened business optimism due to recurring flare-ups of COVID-19 and unstable overseas demand.
In December, the country's manufacturing supply remained strong, with market demand improving from last month. The production index hit the highest in 2021 with the consumer goods and investment goods rising from November, while the manufacturing new orders index returned to above 50.
Some surveyed companies said that as demand rises, new customers have increased; however, some companies said that the overall growth rate of orders was restrained due to relatively high costs, delayed supply cycles and recent COVID-19 flare-ups.
According to the survey, the new export orders index remained in contraction territory for the 5th consecutive month in December. The survey showed that the recurring coronavirus, shortage of shipping containers and rising freight rates slowed down export sales.
Despite the improvement in market supply and demand, employment pressures continued to increase. The survey showed that the employment index was in contraction territory for five consecutive months. Some companies said that the number of employees declined due to unfilled vacancies and subdued order growth, which made companies more cautious about recruitment.
Moreover, the manufacturing entrepreneurs' optimism about the future weakened due to lingering pandemic and supply constraints.
However, inflationary pressure continues to ease due to the government's effective measures to ensure supplies. In December, some raw material prices including steel fell significantly and the purchase price index fell for the second consecutive month, the lowest in 19 months.
Due to the market rebound, manufacturing enterprises purchase volume increased significantly. The survey showed that some enterprises with better sales conditions began to take the initiative to replenish inventory.
The tone-setting Central Economic Work Conference in December noted that due to the complex and uncertain external environment, as well as shrinking demand, supply shocks, and weakening expectations about the world's economic prospects, China should try to stabilize its economy in 2022.
Cong noted that in the future, the authorities should focus on improving employment and strengthen targeted support for SMEs with predictable monetary and fiscal policies, noting that SMEs can help address 80 percent of domestic employment pressure.
Global Times
