China’s manufacturing sector activity has seen toning at a slow-moving pace for eight consecutive months in March, but settled at a slower activity compared in February as a restoring property market provided a much-needed progress over sales of steel, including other construction materials, economists said.
32 analysts are expecting the country to post an official manufacturing Purchasing Manager’s Index (PMI) of 49.3 in March from 49.0 in the previous month. Meanwhile, the reading on February suggests the weakest level since 2011.
Considering an increase on China’s PMI, it indicates a slower rate of shrinkage as it remained lower than 50.0 which separates expansion from contraction.
Furthermore, the country’s factory sector has drawn-out a lengthy slow movement led by deteriorating global demand in exportation, including overcapacity in key sectors like steel and basic materials.
Earlier this week, an unlisted manufacturer of steel in northeast China, Dongbei Special Steel Group Co Ltd, turn out to be the recent casualty of the supply glut and unsteady demand. According to the Shanghai Clearing House, it has failed to pay for a short-term note worth 800 million yuan ($123 million) which matured in the weekend.
However, ahead of the promising turnaround in the construction sector, led by a solid home sales, including sparkling prices in giant cities like Beijing, it has boosted minor support on steel, along with a few embattled tough industries.
A survey from the National Bureau of Statistics for the months of January and February suggested an industrial profit that grew about 4.8 percent from the prior year, retreating seven consecutive months of decline.
An official at NBS stated that the return to growth partly came from a low base in the same period in the prior year, while analysts gave comments that the real estate recovery was considered as well as a factor.
An analyst at CITIC Securitiers Zhang Wenland wrote, "The recovery in property investment has helped industrial profits return to positive growth,"
"Looking forward, industrial profits are likely to grow this year thanks to improved household consumption, a recovery in property investment and a halt in the slump in commodity prices."
Moreover, a few analysts have also said that concerns remained steady is partly led by capital outflows, including the direction of the foreign exchange policy of China, which has restored the country’s business confidence.
An economist at ING Bank, Tim Condon said, "We think some of the January-February strength (in profits) was due to the release of pent-up demand from the second half of last year,"
"We believe steadier (central bank) policy since the second week of January released the pent-up demand."
The yuan currency of China substantially dropped against the dollar in the months of December and January amid broad concerns over capital outflows. However, it turned steady since the Lunar New Year holiday ended in mid-February, which is believed to be helped by the solid intervention by the central bank, as well as the greenback’s loss of upward momentum.
The official manufacturing PMI data will be issued on the 1st of April, together with the official services PMI.
A private and separate gauge of manufacturing data, the Markit/Caixin factory PMI will also be issued on the 1st of April.
China’s Slowing Economy Worries India
As China is the world’s second largest economy, countries that have a strong linkages to it are solidly affected when the country’s economy slows down like India.
India appears to be fortunate as it is less vulnerable to economic tremors arising from China, however, it is not fully protected either. Meanwhile, latest research from the International Monetary Fund, including the Asian Development Bank gauge its effect on the global economy.
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