Workers work at the SAIC Motor-CP manufacturing plant in Chonburi, Thailand, September 7, 2023. Photo: Xinhua

China's manufacturing activities made a return to expansion in November, growing at the fastest pace in the past three months as domestic demand gets stronger, a private survey showed, sending a clear signal that the recovery momentum of the macro economy has been ticking up, analysts said.

The Caixin China General Manufacturing Purchasing Managers' Index (PMI), which gives an independent snapshot of the sector, climbed to 50.7 in November from 49.5 in the previous month, hitting a three-month high and indicating that the manufacturing sector has improved.

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

Supporting the expansion figure in November was a sustained and quicker rise in overall new business orders received by Chinese producers. Despite being modest, the rate of new order growth was the best seen since June, with firms often noting that firmer market conditions had helped to lift sales. 

However, among the sub indices, new export orders continued to fall slightly, underscoring a challenging external demand environment. The measure has been in contraction for the fifth straight month.

Another highlight of the Caixin survey was lifted expectations among entrepreneurs. 

Business optimism rebounded in November. Manufacturers' sentiment improved and the reading for expectations for future output hit a four-month high, though the surveyed companies were still worried about the global economic outlook next year.

"Overall, the manufacturing sector improved in November. Supply and demand both expanded, prices remained stable, logistics improved, purchasing quantities increased, and manufacturers were more optimistic," said Wang Zhe, senior economist at Caixin Insight Group.

The November survey reflected that the macro economy has been recovering with household consumption, industrial production and market expectations having all improved, Wang said, while pointing out that domestic and foreign demand is still insufficient, as economic recovery has yet to find solid footing.

"Policies should focus on expanding consumption, increasing income, promoting employment and stabilizing expectations… should aim to lay a solid foundation for long-term economic growth and cultivate long-lasting market confidence," he added.

Tian Yun, a veteran economist based in Beijing, told the Global Times on Friday that the issuance of an additional 1 trillion yuan ($139.3 billion) in special-purpose treasury bonds since November has effectively lifted market expectations, as it signaled the government's resolve to prop up the world's second largest economy.

With recently released stimulus measures gradually taking effect, Tian believes that domestic demand will continue to improve. 

"As the US Fed's rate hike cycle is coming to an end, the external environment will be eased, thus boosting the foreign trade sector," Tian noted.

Considering the base number for fourth-quarter year-on-year growth is low and current stimulus measures are taking effect, Tian predicted that the October-December period will see the GDP growth rate exceed 5 percent.

The Caixin survey findings are slightly different from the trend mirrored by the official readings.

Data from the National Bureau of Statistics showed on Thursday that China's official manufacturing PMI came in at 49.4 in November, down from 49.5 the previous month, missing market expectations, as the sector has entered a traditionally lackluster season. 

Global Times