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The Financial Express

China recovery boosts Asian factories, but trouble seen ahead

| Updated: December 03, 2020 15:18:42


Strong consumer demand is helping Chinese manufacturers recover to nearly pre-pandemic levels [File: Aly Song/Reuters] Strong consumer demand is helping Chinese manufacturers recover to nearly pre-pandemic levels [File: Aly Song/Reuters]

Asian factories continued to recover steadily in November thanks to a boom in economic powerhouse China, private surveys showed on Tuesday, offering hope the region was shaking off the drag from the COVID-19 crisis, reports aljazeera.com citing agencies.

But a global resurgence in coronavirus infections has made the outlook highly uncertain, keeping governments and central banks under pressure to maintain or ramp up their massive stimulus programmes, analysts say.

China’s factory activity accelerated at the fastest pace in a decade in November, a private survey showed on Tuesday, a sign the world’s second-largest economy is recovering to pre-pandemic levels.

The upbeat findings were in line with an official survey that showed activity at Chinese factories expanded at the fastest pace in more than three years in November, with growth in the services sector hitting a multi-year high.

Return to normal?

“Manufacturing continued to recover and the economy increasingly returned to normality as (the) fallout from the domestic COVID-19 epidemic faded,” said Wang Zhe, senior economist at Caixin Insight Group.

China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 54.9 from October’s 53.6, marking the highest level since November 2010.

The gauge stayed well above the 50-level that separates growth from contraction for the seventh consecutive month.

A steady recovery in global demand also helped Japan’s factory activity move a notch closer to stabilisation in November, and that of South Korea to accelerate at the fastest pace in nearly a decade.

The final au Jibun Bank Japan Manufacturing PMI hit 49.0 in November, up from the previous month’s 48.7 and a preliminary 48.3 reading.

South Korea’s IHS Markit PMI rose to 52.9 in November from 51.2 in October, the highest reading since February 2011 and marking the second month of activity expansion.

Factory activity also grew in Taiwan and Indonesia, a sign the pick-up in Chinese demand was underpinning the region’s economy.

Many analysts, however, remain cautious on the outlook, with global and domestic demand vulnerable to infection trends.

“Japan’s economy likely slowed in July-September but averted a contraction due to a pick-up in exports and the effect of government campaigns to prop up demand,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“But the economy may contract in January-March if households hold off on spending again. If service-sector firms suffering from plunging sales cut spending, that could hit jobs and capital expenditure.”

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