Workers gather at a workshop of an equipment manufacturer on Yunmenshan Street in Qingzhou city, east China's Shandong province, August 9, 2023.
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China's factory activity among smaller manufacturers rebounded in October, according to a private survey released Friday.
The Caixin/S&P Global manufacturing purchasing managers' index came in at 50.3 in October, beating the median estimate of 49.7 in a Reuters poll.
The value was 49.3 in September, 50.4 in August and 49.8 in July. A PMI reading above 50 indicates an expansion in activity, while a reading below this level indicates a decline.
This private indicator comes after official PMI data released on Thursday suggested that manufacturing activity in the country increased for the first time since April. The Caixin series tends to focus more on exporters and private sector companies than the official PMI data, which includes larger and state-owned companies.
“Both supply and demand have increased. “Overall market demand recovered while production grew steadily,” Wang Zhe, a senior economist at Caixin Insight Group, said in the survey release.
According to the press release, new orders received from Chinese manufacturers also rose at their fastest pace in four months due to “underlying demand conditions and successive new business development efforts.”
However, Caixin noted that export orders continued to decline, although the decline moderated in the last survey period and employment fell again, meaning manufacturers remained cautious about the number of workers.
The latest numbers are “definitely encouraging for the market,” said Andy Maynard, managing director of China Renaissance, and a good sign that the stimulus packages introduced by the Chinese government in September are “obviously well received.”
In September, the People's Bank of China cut the reserve requirement ratio, or RRR, the amount of cash banks must hold as reserves, by 50 basis points. Additionally, the seven-day reverse repo rate was cut from 1.7% to 1.5%, a decline of 20 basis points.
“I think it's early stages, a small step to some extent, and it would be interesting to see what the data points look like as they come out in the future,” Maynard said.
The world's second-largest economy is struggling to regain its growth momentum amid subdued consumption and a competitive real estate market. Exports were a rare bright spot.
“Sentiment has stabilized somewhat due to a more pro-growth government agenda to rescue the economy, raising hopes for more robust demand,” said Gary Ng, senior economist at Natixis.
Still, there remains uncertainty about whether the trend can continue, Ng told CNBC. Domestic competition in China remains intense and industrial utilization, which measures business efficiency, is still below historical averages.
Foreign demand could also be affected by the outcome of the upcoming US election and rising protectionism globally, he added. “Whether prices can rise in the future will be important in assessing the recovery in the manufacturing sector.”
China's parliament's standing committee will meet next week and expects to announce details of the fiscal stimulus after the session ends on November 8.
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