China’s factory activity contraction likely deepened in Nov on COVID woes: Reuters Poll

BEIJING (Reuters) – China’s factory activity is expected to have contracted further this month, piling pressure on the economy as COVID restrictions hit production and exports fell despite a flurry of stimulus policies, a Reuters poll showed on Monday.

The official manufacturing Purchasing Manager’s Index (PMI) was forecast at 49.0 in November from 49.2 in October, below the 50-point mark which separates contraction from growth, according to the median forecast of economists polled by Reuters.

The world’s second-largest economy experienced a broad slowdown in October, with exports falling, inflation slowing and a property slump deepening.

To prop up the faltering economy, the central bank last week announced it would cut banks’ required reserve ratio (RRR) for the second time this year, and rolled out a rescue package outlining 16 steps to support the distressed property sector.

Authorities have also introduced a range of other measures this year in an attempt to revive growth, but the recovery has been stifled by COVID woes, the Ukraine war and a slowdown in the global economy.

Beijing this month also eased some of the nation’s COVID curbs, though local authorities in some Chinese cities tightened restrictions to contain record high daily infections.

Mounting public anger over China’s stringent zero-COVID policy sparked rare protests over the weekend.

“This would lead to an increased level of uncertainty over the degree of political risk in China, spilling over into damaged confidence and hence consumption in an already weakened economy,” Moody’s said of the protests in a note to clients.

China’s economy is poised to miss the “around 5.5%” full-year government growth target with gross domestic product expanding just 3% in the first three quarters of this year. Chinese advisers say they will recommend a modest growth target for 2023 ranging from 4.5% to 5.5% to an annual policymakers’ meeting in December.

The official manufacturing PMI, which largely focuses on big and state-owned firms, and its survey for the services sector, will be released on Wednesday.

The private sector Caixin manufacturing PMI, which centres more on small firms and coastal regions, will be published on Thursday. Analysts expect a headline reading of 48.9 from 49.2 in October.

(Polling by Veronica Khongwir and Maneesh Kumar; Reporting by Liangping Gao and Ryan Woo; Editing by Shri Navaratnam)