China recently announced its manufacturing Purchasing Manager Index (PMI) and non-manufacturing PMI for March 2020 rebounded from a record low to be back above 50, with both recording at 52.0 and 52.3, respectively. The strong rebound signaled the world’s second-largest economy is recovering from the coronavirus outbreak, though analysts said the number above 50 doesn’t mean that China’s economic activity is fully resumed. Yesterday, the Hang Seng Index (HSI) tumbled 2.2% to 23,085.79, in line with broader Asia.

China’s PMI and non-PMI data rebounded from a sharp fall

After an abrupt fall in February, China’s PMI rebounded to 52 from 35.7 while the non-manufacturing PMI jumped to 52.3 from 29.6. For manufacturing, the production and new orders rose above 50 but export orders and imports were still recorded below 50. This reflects that domestic demand has recovered faster than external demand which has been affected by the coronavirus for most of March.
 
Meanwhile, in China’s services and construction sectors, while the headline number rose above 50, much of the underlying activity was still in contraction, with employment at 47.7 and new export orders at 38.6. 
 
According to Bloomberg’s article on 31 March, China is still expected to have an unprecedented economic contraction this quarter. The outlook for the April-June period depends both on how quickly domestic can rebound given the fact that now the virus is contained in China, and the strength of demand from overseas markets like the US which are facing their own spikes in infections.
 

 

Survey showed companies still face big operational pressures

According to the National Bureau of Statistics (NBS), while manufacturing PMI rebounded rapidly in March, the survey showed companies still face relatively big operational pressures. NBS also added that more firms are reporting funding shortages and falling demand than in February as the global virus spread will hit the world economy and trade seriously and bring new, severe challenges to the Chinese economy.

Analysts forecasts more fiscal measures and monetary policy easing

Bloomberg’s economists, Chang Shu and David Qu said that the Chinese economy has not returned to normal and faces challenges unseen for decades on both domestic and external fronts. The economists also expected that the government will provide policy support especially fiscal measures and more monetary policy easing.
 
Both fiscal and monetary policy measures are market friendly as they help the Chinese economy to surf the tide. Earlier, China’s central bank has cut the policy rate pre-emptively to avoid a credit crunch in China without putting weakening pressure on the yuan.