China’s manufacturing activity rose for the second straight month, a further sign of stabilization after Beijing rolled out a stimulus package to support the economy, according to a private survey.
According to a statement released by Caixin and S&P Global on Monday, the Caixin manufacturing purchasing managers’ index rose to 51.5 last month, its highest level since June. The expansion was much larger than the 50.6 forecast by economists and accelerated from 50.3 in October.
The result showed Chinese exports continue to drive the $18 trillion economy’s uneven recovery, despite U.S. President-elect Donald Trump threatening to impose tariffs that could decimate trade between the countries. Official measures November activity showed a slight pick-up in manufacturing, while the construction and services index unexpectedly fell back to the 50 mark that separates contraction from expansion.
“Front-loading could continue to support manufacturing activity for several months until tariffs take effect, which could happen quite quickly given the mechanism in place in the U.S.,” said Michelle Lam, Greater China economist at Société Générale SA.
Customer inventories helped new orders rise in November at the fastest pace since February last year, with production price inflation hitting a 13-month high, according to the Caixin survey. But employment remained down for the third month in a row, suggesting the impact of the stimulus has already trickled down to the labor market.
“While the economic downturn appears to have bottomed out, further consolidation is needed,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the news release. “The structural and cyclical pressures facing the economy are expected to continue.”
The purchasing managers’ index for Asia (excluding China and Japan) was little changed in October, while a measure of export orders improved the most since May, another sign that economies across the region are strengthening ahead of Trump’s announced tariffs is preferred.
In China, domestic demand benefited from Beijing’s subsidies for purchases of home appliances, cars and equipment in a Trade-in programalthough economists say more policy support is needed to maintain growth momentum.
“These plans are simply driving demand, while real estate transactions are unlikely to improve significantly unless the outlook for jobs, income and inflation improves,” said Kelvin Lam, China economist at Pantheon Macroeconomics.
The Caixin results were mostly better than those in an official survey last year as exports remained strong. The two surveys cover different sample sizes, locations and company types, with the private survey focusing on small and export-oriented companies.
Export data released last month showed shipments in the first three quarters reached the second highest on record, marking a boom that put China on track for a record trade surplus that could reach nearly 50% 1 trillion dollars this year.
At the end of September, China implemented sharp interest rate cuts and announced measures to strengthen the real estate market. That has led some analysts to raise their forecast for China’s growth in 2024, raising the median forecast for this year’s growth to 4.8%, according to Bloomberg estimates.