2019/4/1 China's Factory Rebound Heralds Improvement in Global Outlook - Bloomberg

Economics

China's Factory Rebound Heralds

Improvement in Global Outlook
Bloomberg News
2019年3月31日 GMT+8 下午1:02

Manufacturing PMI jumps most in seven years, starts expanding

The rise will ‘marginally’ lift global outlook: Commerzbank

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China’s first official economic gauge for March signaled a stabilization in the world’s second-
largest economy, easing one of the biggest worries for the global outlook.

The manufacturing purchasing managers index rose to 50.5 from 49.2 last month, the biggest
increase since 2012 and exceeding all estimates by economists. Both new orders and new
export orders – leading sub-gauges that signal future activities -- rose to the highest levels in
six months.

That’s good news for global investors, as China’s weakening demand had weighed on sectors
such as auto producers and commodity exporters worldwide. However, with tariffs and
uncertainty about whether a deal with the U.S. will be signed weighing on trade and no sign
of a rebound in domestic consumption yet, there is still a way to go.

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2019/4/1 China's Factory Rebound Heralds Improvement in Global Outlook - Bloomberg

“China’s economy has improved, supporting a stabilization in the global economy,” said Hua
Changchun, global chief economist at Guotai Junan Securities Co. That stabilization will also
lift the European and U.S. economies, and may lead to a global asset price increase, he said.

‘Better Than Expected’

Sunday’s release backs up signs of recovery seen in the earliest data on the economy, which
showed business confidence and stock markets improving amid policy support and progress
in the China-U.S. trade talks. The government is also showing signs of optimism, with Premier
Li Keqiang last week telling business people that the economy is doing better in the first
quarter than expected.

Still, there’s evidence for caution. New export orders are still contracting even after the
pickup from the lowest level in a decade in February. In addition, the rise in the March data
may overstate the actual increase in activity, as the Lunar New Year holiday in February
weighed down the data then, according to Zhou Hao, an economist with Commerzbank AG in
Singapore.

If tomorrow’s data on South Korean March exports confirm a pickup, the market will be
further convinced that China’s economy is turning around, Zhou said. That will “marginally”
lift concerns about a downturn in China, and lower expectations in the short term for a
reduction in the amount of money banks must keep in reserve, he said.

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2019/4/1 China's Factory Rebound Heralds Improvement in Global Outlook - Bloomberg

Growth of the world’s second-largest economy will slow further this quarter to 6.2 percent
from a year earlier and stabilize at that level throughout 2019, according to economists
surveyed by Bloomberg.

The government has repeatedly vowed not to resort to “flood-like” stimulus and may pare
back support measures if things do start looking better.

“Once the rebound is confirmed, the government will not use up their fiscal firepower,”
according to Ding Shuang, chief China and North Asia economist at Standard Chartered Bank
Ltd. in Hong Kong. According to Ding, the government is still concerned about local
government debt risks, and if the trade talks reach a deal there will likely be a reduction in
policy stimulus around mid-year.

— With assistance by Xiaoqing Pi

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