Chinese enterprises quicken steps to resume production

China's official Purchasing Managers' Index (PMI) rose to 52 percent in March, up 16.3 percentage points from February, according to data jointly released by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing.

As a month-on-month economic indicator, PMI reflects the short-term changes in economic activity. Generally speaking, 50 percent separates monthly growth from contraction. When PMI is above the 50-point mark, it indicates an expanding manufacturing economy, and when the figure is below 50 percent, it reflects that the economy is generally contracting.

“The data can be interpreted to mean that half of the manufacturing enterprises embraced positive changes in production and business operations in March,” according to Zhao Qinghe, a senior statistician with the NBS.

Statistics from Chinese steel trading website Zhaogang.com indicated that the country's steel trading volume stood at 880,000 tons in February, only 30 percent of last year’s average level. However, the figure increased explosively in March.

With positive changes taking place in domestic epidemic control and prevention, downstream manufacturing and construction industries resumed production at a faster pace in March, noted Gong Yingxin, secretary of the Party committee and senior vice president of Zhaogang.com.

Gong disclosed that the daily steel trading volume on the platform has reached 160,000 tons, four times that in February, and the platform’s trading volume has generally recovered to last year’s average.

Crown Advanced Material Co., Ltd. is a manufacturer of multifunctional composite materials based in Yichun of east China’s Jiangxi province. In March, it kicked off the second phase of a project of protective film, solar backboard and lithium battery aluminum plastic film production with a total investment of one billion yuan ($141.6 million).

“Our orders have expanded by 30 percent year-on-year since we resumed production. In March we delivered orders worth $4.5 million to our overseas clients,” said Yan Hongjia, president of the company.

China made positive progress in coordinating epidemic control and economic development in March, and enterprises have been resuming production at a faster speed, said Zhao.

However, the single-month rise doesn’t necessarily mean the production and operation have been back to pre-outbreak levels, according to head of the Service Survey Center with the NBS, who told People’s Daily that the upturn of economy only comes when the PMI moves up for at least three consecutive months.

A survey indicated that enterprises still face significant pressure to further boost production and operation despite the expanding PMI, Zhao pointed out. In March, 41.7 percent of manufacturing enterprises reported insufficient capital provisions, up 2.6 percentage points from the previous month and 52.3 percent reported sluggish market demand, 4.1 percentage points higher than February.

Zhongjie Footwear Co., Ltd. in Yifeng county, Yichun of Jiangxi province mainly exports shoes to Europe and the U.S. Due to the global spread of the pandemic, its export orders for the following months have shrunk by 40 to 50 percent, which brings a monthly loss of nearly 4 million yuan to a single branch factory of the company alone.

“We had planned to recruit 300 workers at the beginning of March to complete orders placed before the outbreak, However, we didn’t expect the pandemic to exacerbate so quickly overseas. Many of our foreign clients have been cancelling or postponing orders since mid-March,” said He Jiating, head of the company.

The NBS statistics indicated that the index of new export orders and the import index of Chinese enterprises ticked up to 46.4 and 48.4 percent, respectively in March, but were still mired in contraction.

To match effective supply and effective demand is an important criterion to evaluate the effectiveness of production resumption. In promoting resumption of work and production, the demand side must be improved, and supply-side structural reform should be deepened in a solid manner. In addition, targeted measures should be rolled out based on market demand, so as to avoid inefficient and blind development, and reduce overstaffing, wasting of materials and inefficient circulation of capital.

Doing so, the losses caused by the epidemic can be minimized and the foundation for further economic recovery is consolidated.

Currently, epidemic control and the economic situation are seeing major new changes, both in China and abroad, Zhao said. The country faces huge pressure brought by imported cases of novel coronavirus disease, which challenges its economic development, especially the recovery of the industrial chain. Therefore, PMI data need to be further observed.