Manufacturing Expansion Underscores China Recovery

By Glenn Dyer | More Articles by Glenn Dyer

China’s economy continues its recovery in the wake of the coronavirus outbreak earlier in the year with signs the pace of the rebound is strengthening.

The two monthly surveys of manufacturing activity from the National Bureau of Statistics (NBS) and Caixin/Markit both showed a stronger pace of than forecast.

But the news had no impact on the country’s stockmarkets which fell on the final day of the month to be down for September and the quarter.

The official NBS manufacturing purchasing managers index rose to 51.5 in September, beating forecasts and August’s reading of 51.0,

The service sector also rebounded with a strong September.

The second private survey from Caixin/markt rose to a very strong 53 in September, roughly steady with the August reading.

China’s service sector, which a weak link in the economy for much of the summer due to lingering coronavirus concerns and weak consumer spending, also saw a strong September.

China’s official non-manufacturing PMI, which includes both the service and construction sectors, jumped to 55.9 in September, its highest result since November 2013 and better than the previous month’s reading of 55.2.

Both surveys point to improving demand from overseas markets. The official export-order subindex climbed into expansionary territory for the first time this year, while the Caixin survey showed export orders hitting a three-year high.

But the strong gains for the economy have not seen a similar performance by the country’s stockmarkets which slumped in September.

China shares closed the month and quarter lower on Wednesday as worries about real estate companies and the stability of major players and banks outweighed the news from the economy.

In fact September saw the worst monthly performance for Chinese equities in 18 months.

The Shanghai Composite index ended down 0.2% at 3,218.05 and the blue-chip CSI300 index 0.1%. For the month, the Shanghai Composite index lost 5.23% and the CSI300 index 4.75%. The Shanghai market lost more then 6% for the quarter.

China’s markets will be closed for the national holidays from today, October 1 through 8.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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