China’s factory activity increased in January after months of recession, according to data released on Tuesday, as the world’s second-largest economy returns to life following Beijing’s removal of severe Covid restrictions.
As a result of strict lockdowns and a worsening housing market crisis, the Asian superpower’s economy grew by barely three percent in 2017.
A crucial indicator of factory output increased this month, and the International Monetary Fund (IMF) increased its growth prediction for 2023 to 5.2%.
National Bureau of Statistics (NBS) statistician Zhao Qinghe stated in a statement that pandemic preventive measures have “entered a new phase” that permits “a gradual return” to regular living.
He said that the official purchasing managers’ index (PMI) for the manufacturing sector increased to 50.1 this month from 47.0 in December, marking the first time since September that the indicator has been above the 50-point growth threshold.
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The non-manufacturing PMI, which includes the services and construction sector, rose to 54.4 in January, well above the 52 points forecast by economists surveyed by Bloomberg.
Authorities have reported that the increasing number of virus cases that accompanied China’s reopening has already peaked, with a travel spike sparked by the country’s largest Lunar New Year holiday in years providing a much-needed economic boost.
“The official PMIs add to evidence of a rapid rebound in economic activity this month as disruption from the reopening wave faded,” Sheana Yue, China economist at Capital Economics, said in a note.
“More consumers returned to the streets, boosting services activity, while reduced labor shortages aided industry,” added Yue.
And now that zero-Covid is behind us, the recovery should continue robust in the immediate future.
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PANDEMIC RESTRICTIONS
Pierre-Olivier Gourinchas, chief economist of the International Monetary Fund, told reporters that pent-up demand generated during three years of severe pandemic measures would contribute to a rapid recovery of economic activity in the country.
IMF chief Kristalina Georgieva remarked in the past that the country produced up to 40 percent of global growth.
But deep-seated issues in China’s economy remain, with problems in the property industry still weighing on growth.
The sector, which along with construction accounts for more than a quarter of China’s GDP, has been hit hard since Beijing started cracking down on excessive borrowing and rampant speculation in 2020.
“Fundamentally, Beijing appears unwilling to do much more beyond lifting zero-Covid to buoy growth,” Houze Song, a fellow at the MacroPolo think tank, said.
“We believe the economic rebound will be most impressive in (the first quarter of 2023) and then peter out later this year,” they added.
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