Chinese Factory Output Growth Outshines many Asian Countries

Summary

• China's industrial output increased 6.9% in October, beating analyst forecasts of a 6.5% rise. Retail sales rose 4.3% in the year, but at a slower than the expected pace.
• Caixin China Manufacturing PMI rose from October’s 53.6 to 54.9 in November, as manufacturing continued to recover, and the economy gradually returned to normalcy.
• Factory activity in many Asian economies rebounded in November due to a boom in China's economy, signalling that the region was shrugging off the economic strain that came due to the COVID-19 pandemic.

With coronavirus mostly under control in China, buyers are ready to spend again in a bid to lift activity further.

As per the National Bureau of Statistics data, industrial output of China soared 6.9% in October compared to a year ago in sync with gains in September, aided by resilient exports.

The factory output of the world's second-largest economy rose much faster than expected in October, and retail sales persisted to recover, though at a slower pace than predicted.

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Retail sales grew 4.3% on-year, quicker than 3.3% rise in September, but missing the forecasted 4.9%-mark as per the analysts. Further, Chinese auto industry posted 12.5% increase in October vehicle sales due to rising demand for electric cars and trucks.

Fixed-asset investment rose 1.8% in January-October from the same period in 2019 while the private sector fixed-asset investment fell 0.7% during the same period, compared to a 1.5% drop in the first 9 months of the year.

Fu Linghui, the spokesman of the National Statistics Bureau, stated that the Q4 economic growth of China would quicken from Q3 as consumption opportunities are progressing, with the services industry demonstrating good recovery.

Caixin China Manufacturing and Services PMI climbed at a faster pace in November

Caixin China General Manufacturing PMI findings were in line with the official survey, showing that the Chinese factory output grew at the quickest pace in more than 3 years in November.

As per the data from the National Bureau of Statistics, China's official manufacturing PMI rose from 51.4 in October to 52.1 in November, the highest PMI reading since September 2017.

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The Caixin China General Manufacturing PMI increased to 54.9 in November from 53.6 In the previous month, with the measure staying above 50 that segregates growth from contraction for the 7th month consecutively. As per market reports, the headline reading for PMI was forecasted to be at 53.5.

Wang Zhe, a senior economist at Caixin Insight Group, stated that employment has improved and overseas demand also kept expanding.

He added that the economic rebound would continue for several months in the post-pandemic period, and strategic preparation would be needed to determine how to ultimately eliminate easing policies launched during the outbreak, as complexities remain within and outside China.

Similarly, Caixin China General Services PMI hit 57.8 in November, up from 56.8 the previous month, and reaching the second-highest level since April 2010, as new businesses rose at a faster speed in over a decade as the nation began to recover from coronavirus.

Asian economies rebound as China booms

Factory activity in some of the biggest export-led Asian economies recovered in November as recovery in China gave a boost to the economies.

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The private survey showed that the Asian factories began to rebound gradually in November due to renewal of the economic superpower China, giving optimism that the country is shaking off the drag of the COVID-19 crisis.

However, the global outlook is still uncertain due to resurgence of coronavirus infections.

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As per IHS Markit data, South Korea's PMI increased from 51.2 in October to 52.9 in November, the highest reading since February 2011, while the PMI data for Japan increased to 49 in November from 48.7 previously.

Southeast Asian figures have stayed mixed. The Indonesian index scored 50.6, third reading above 50 this year. Thailand continued to remain in the expansion zone, while Vietnam and the Philippines scarcely contracted at 49.9 each. Malaysia dropped to 48.4.

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The economic recovery in China is expected to intensify in Q4. With a recovery in demand, high credit growth and stimulus measures are likely to provide a solid tailwind into 2021.

In 2020, economists expect China's economy to expand by approximately 2%, the lowest since 1976, but still much better than other large economies.