In April, the manufacturing sector in China saw rapid growth, with both supply and demand expanding rapidly. This was reflected in the Caixin/S&P purchasing managers index (PMI) survey, which showed a significant increase in output and new orders for manufacturing enterprises. The PMI rose to 51.4 points from 51.1 points in March, exceeding analysts’ expectations and representing the fastest pace of growth since February 2023.
The manufacturing sector has continued to show improvement over the past few months, driven by strong demand for products such as cars, machinery, and electrical equipment. Transportation and logistics systems have also operated smoothly, contributing to the positive outlook for the sector. However, despite this growth, manufacturers are facing challenges such as rising input costs and competition.
Rising input costs have led businesses to reduce prices to attract orders and exercise caution when hiring more workers. Despite increased purchases and inventory levels reflecting positive sentiment among businesses, the labor market has not seen improvement. An ongoing decrease in job numbers has been attributed to restructuring efforts and resignations. As a result, manufacturers are experiencing a squeeze on profits.
Wang Zhe of Caixin Insight Group emphasized that while businesses are optimistic about the future of the manufacturing sector, challenges such as rising costs and tight labor markets persist. The official PMI from China’s National Bureau of Statistics also showed growth in April but still lagged behind the Caixin PMI by 0.4 points due to ongoing struggles with raw material procurement and supply chain disruptions caused by Covid-19 outbreaks overseas.
Overall, while there are signs of positive sentiment among businesses in China’s manufacturing sector, there remain significant challenges that must be addressed if it is to sustain long-term growth.