Manufacturing sector on track for recovery

Employees of an engineering machinery manufacturer in Shandong province work on the company's production line of loaders. (Photo/Xinhua)

China's manufacturing sector showed signs of sustained recovery in November, as recent stimulus measures restored confidence among consumers and investors, pointing to strong economic resilience amid ongoing global and domestic challenges, analysts said on Sunday.

The government's focus will remain on stabilizing growth through continued fiscal stimulus, including measures aimed at stimulating consumer demand and improving the housing market, they said.

They also expect that these efforts will contribute to a modest improvement in GDP growth in the fourth quarter, which is projected to reach about 5.3 percent year-on-year, marking a significant rebound from the 4.6 percent growth seen in the third quarter.

Data from the National Bureau of Statistics showed on Saturday that China's official purchasing managers index for the manufacturing sector rose from 50.1 in October to 50.3 in November, remaining above the 50 mark that separates expansion from contraction for the second consecutive month and hitting a seven-month high.

"With the introduction of a package of incremental policies and the effects of existing policies gradually emerging, the level of economic prosperity has steadily improved in November," said Zhao Qinghe, an NBS statistician.

NBS data also showed that the gauge for manufacturers' expectations for production and operation stood at 54.7 in November, compared with 54 in October, indicating that manufacturers' optimism and confidence are growing.

"China's manufacturing sector showed signs of recovery in November with improvement in both demand and supply, buoyed by a combination of stimulus policy measures as well as increased workdays in November," said Wu Chaoming, deputy director of the Chasing International Economic Institute.

The sub-index for production was 52.4 in November, compared with 52 in October, while the gauge for new orders came in at 50.8 in November, up from 50 in October, NBS data showed.

"With the incremental policies further taking effect and various regions beefing up efforts to stabilize growth to meet this year's growth target, China's economy is on track for a notable rebound in the fourth quarter, as factory activity is set to expand for the third consecutive month in December," said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International. Wang said China's GDP growth for the fourth quarter is projected to reach approximately 5.3 percent year-on-year, putting the nation on track to meet its annual GDP growth target of around 5 percent this year.

Despite the uptick in manufacturing PMI, China's nonmanufacturing PMI, which includes subindexes for activity in the services and construction sectors, dropped from 50.2 in October to 50 in November. Meanwhile, the country's official composite PMI, which encompasses both manufacturing and nonmanufacturing activities, came in at 50.8 in November, the same as the figure in October.

"Current market demand still requires further stimulation, and the pace of macroeconomic recovery remains moderate," Wang said.

Wang said he believes that "whether the macroeconomy can break free from downward pressures depends largely on whether the real estate market can quickly stabilize and reverse its downward trend", adding that a significant change in the external trade environment in 2025 will also be the key.

Against that backdrop, he said timely reinforcement of countercyclical adjustment will provide important support for future improvement in manufacturing activity and the broader macroeconomic outlook.

Robin Xing, chief China economist at Morgan Stanley, noted that "recent policy dynamics signal a strong turning of overall government policy in trying to bolster economic growth, boost confidence and stabilize expectations".