China’s factory sector grew at a remarkable pace in February, with the official manufacturing purchasing managers’ index (PMI) reaching its highest level in more than a decade.
This positive news comes at a time when manufacturing growth in other parts of Asia has stalled, impacted by global demand slowdown, high inflation, and interest rates. The results of surveys conducted on Wednesday highlight China’s impressive resilience in the face of global economic challenges.
The official PMI, which is released by the National Bureau of Statistics, rose from 50.1 in January to 52.6 in February. A private sector survey conducted by Caixin/Markit also showed that activity had increased for the first time in seven months.
The Caixin/Markit manufacturing PMI climbed to 50.9 in February, from 48.4 in January. These numbers indicate that Chinese factories are bouncing back strongly following the lifting of COVID-19 restrictions late last year.
China’s strong rebound in the manufacturing sector is particularly noteworthy given the challenges facing other countries in the region.
For example, South Korea’s manufacturing sector contracted for the first time in the span of five months in February, with the country’s PMI dropping to 49.8. Japan’s PMI also slipped to 50.6 in February, marking the slowest expansion in eight months.
China’s strong performance is particularly important for the global economy, as it could potentially mitigate an expected downturn in the coming year. As the US Federal Reserve keeps interest rates high for longer, China’s ability to keep growing could be a bright spot in an otherwise challenging economic landscape.
In Asia
However, the economic slowdown in Asia continues, as India and Australia both reported a slower growth rate in the quarter ending December. South Korea’s exports also fell for the fifth consecutive month in February, highlighting the pain that slowing global demand is causing the region’s manufacturers.
The weaker economic data in Asia highlights the challenge faced by policymakers in the region. While they are attempting to rein in inflation with higher interest rates, they must be careful not to choke off the economic recoveries already facing pressure from the global economic slowdown.
Analysts say that the impact of fast-paced interest rate hikes is already being felt in many countries, with Bank of Japan (BOJ) board member Junko Nakagawa stating that “overseas economies are showing stronger signs of slowdown.”
A survey conducted on Wednesday revealed that Japan’s final au Jibun Bank PMI dropped at the fastest rate in over two years, falling to 47.7 in February from January’s 48.9. This is despite China’s recovering economy, which is the world’s second-largest, and suggests that it may not be enough to counteract the challenges faced by export-reliant economies such as Japan due to weak chip demand and supply constraints.
This weak outcome followed data showing a significant drop in Japan’s factory output in January, due to slumping production of cars and semiconductor equipment. This casts doubt on the BOJ’s view that the economy is on course for a steady recovery.
The slowdown in Asia is a concerning trend for the global economy, given the significant role that the region plays in driving global growth. The rise of COVID-19 cases in many Asian countries has added further challenges to the economic landscape, making it more difficult for governments and central banks to navigate the ongoing challenges.
Economic Effects
Despite the challenges, policymakers in the region are working to implement measures to support economic growth. This includes ongoing efforts to boost domestic demand, as well as targeted support for key sectors such as technology and manufacturing.
Factory activity continued to decrease in Taiwan and Malaysia in February, and although the Philippines saw expansion, it was at a slower pace than in January, according to recent surveys.
The ongoing slowdown in the manufacturing sector highlights the ongoing challenges faced by economies in the region, as they attempt to navigate the impacts of the COVID-19 pandemic and global economic slowdown.
However, India’s manufacturing activity expanded at a relatively strong pace in February, albeit slower than in previous months. The country’s private PMI survey showed that while growth had slowed slightly, it remained buoyant due to robust domestic demand.
South Korea’s exports also saw a decline of 7.5% in February from a year earlier, marking the fifth straight month of declines. The drop was partly due to a plunge in semiconductor exports, which have been impacted by global supply chain disruptions.
Hopeful Policymakers
Despite the challenges facing many Asian economies, policymakers are hopeful that China’s reopening from COVID-19 curbs, along with the resilience seen so far in the U.S. and European economies, will help underpin global growth this year.
The International Monetary Fund recently raised its 2023 global growth outlook slightly due to “surprisingly resilient” demand in the United States and Europe, along with an easing of energy costs and the reopening of China’s economy after the country abandoned its strict COVID-19 restrictions.
While there are still many challenges ahead, there are also reasons for cautious optimism. Many Asian economies have shown resilience and adaptability in the face of ongoing challenges, and are continuing to work towards implementing measures to support economic growth.
This includes ongoing efforts to boost domestic demand, as well as targeted support for key sectors such as technology and manufacturing.
Photo: Siliconeer
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