Weak Exports Drag Down Activity
China's manufacturing industry, which accounts for one-third of the world's second-largest economy, lost momentum in March due to weak export orders, hindering the country's economic recovery from COVID-19 restrictions. The Caixin/S&P Global manufacturing purchasing managers' index (PMI) fell to 50.0 in March, below expectations and February's reading of 51.6. China's economy showed signs of recovery in the first two months of the year, but a convincing rebound in manufacturing has been lacking, dragging down the economy's outlook.
- The new export orders sub-index fell to 49.0 in March, indicating weak global demand
- Experts expect weak external demand and a recovery in domestic demand in the next few months
- However, most of the reopening recovery is expected to come from the services sector, which was hit the hardest by COVID-19 policies
Recovery Uncertain Amid Global Financial Instability
China's economic recovery is uncertain due to a property downturn and global financial instability. The boost in economic growth will rely on an improvement in household consumption, according to Wang Zhe, a senior economist at Caixin Insight Group.
- Although the services sector showed fast expansion, doubts remain about the strength of China's rebound
- China's new premier and central bank are taking steps to support consumption and investment and more pro-business policies are expected from the new economic team, although expectations for stimulus are low, according to Citi
But... Real Estate May Be Coming Back To Life
According to a survey released on Monday by the People's Bank of China, there is an increased desire among people in China to buy houses. In the first quarter of this year, the percentage of respondents planning to purchase a home in the next three months rose to 17.5%, up from 16% in the previous quarter, and the highest level since the first quarter of 2022.
- The survey also indicated that market expectations have improved, with 18.5% of respondents anticipating an increase in house prices, a significant increase from 14% in the previous quarter and the highest level since the third quarter of 2021
- This trend is attributed to the end of Covid controls in China and the support provided by central and local governments to property purchases and developers in the past year
In China, houses are usually bought before they are completed, and during the summer of 2022, many homebuyers chose not to pay their mortgages due to Covid and financial difficulties that prevented developers from delivering apartments on time.
Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. Please note that the writer of this article is not registered as a financial advisor.