China experiences a decrease in production rate
According to data obtained from the National Bureau of Statistics (NBS), production in Chinese factories experienced minimal growth. Its current manufacturing Purchasing Managers Index (PMI) is at the lowest it’s been since May 2020.
The slow growth hindered China from meeting the expected Market output. Although its PMI score is at 50.6, it did not fall to the 50.0 level that marks contraction. Analysts are expecting the PMI score to fall to 51.1.
Activity at Chinese factories are yet to fully resume
Normally, activities at Chinese factories hit low levels during the Lunar new year, but the coronavirus pandemic has led the government to reduce the activities of workers in factories.
China’s economic growth has been picking up speed since its decline early in 2020 due to an increase in foreign demand for goods and stimulus packages implemented by the government.
The official PMI is composed of stats from big and state-owned companies in China. Data showed that new export orders dropped from 50.2 in January to 48.8 in February. A sub-index composed of stats from small-sized companies dropped from 49.4 in January to 48.3 in February.
Manufacturing companies suffering from increasing production costs
Manufacturing companies are suffering from increasing production costs, due to a decrease in available workers and a rise in labor wages. This was reflected in a sub-index for employment in the PMI, which dropped from 48.4 in January to 48.1 in February.
Manufacturing companies also have to contend with rising costs of raw materials caused by an increase in demand for more products. Policy sources say China may not set a growth target like it did last year to prevent companies from taking out more loans.
China’s new commerce minister said the country will continue to assist by crafting policies that will benefit foreign trade and their supply chains.