IS210DSVOH1AA China’s manufacturing supply and demand continued to expand, and the manufacturing industry prosperity rose to a four-month high in December 2023.

The Caixin China Manufacturing Purchasing Managers’ Index (PMI) for December 2023, released on January 2, recorded 50.8, 0.1 percentage points higher than the previous month and in the expansion range for two consecutive months.

The manufacturing PMI released by the National Bureau of Statistics in December 2023 fell 0.4 percentage points to 49.0, and was listed as the second-lowest in 2023 this year with June.

From the sub-index, the expansion rate of IS210DSVOH1AA manufacturing production and demand in December 2023 slightly accelerated, respectively, the highest since June and March 2023. Respondents reported that market demand improved, new orders for consumer and intermediate products increased in the month, and the decline in investment orders slowed down. In terms of production, the output of the three major categories rose, with the consumer category leading the way. In addition, external demand improved marginally, with the new export orders index rising in contraction territory to the highest level in nearly six months.

Despite the expansion of supply and demand, the pressure on manufacturing employment IS210DSVOH1AA did not ease in December, and the employment index fell to the lowest since June 2023. Companies have been relatively cautious about hiring, failing to fill vacancies after voluntary departures or even cutting back on staff because of weak demand. However, backlog fell for the first time after six consecutive months of growth, as some companies earmarked capacity to clear backlogs and others failed to sell as expected.

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Purchases by manufacturers were flat in December after a slight increase the previous month. By category, consumer goods manufacturers increased their purchases, intermediate goods declined, and investment goods remained flat. Inventories of raw materials fell for three consecutive months, related to the general reduction of inventories and cost cutting by enterprises. The shortage of raw materials and the shortage of suppliers’ production capacity caused the supplier’s supply speed to decline again, failing to continue the improvement trend of the previous two months.

IS210DSVOH1AA The price level is relatively stable. Business costs were still rising in December, mainly due to higher prices for raw materials such as metals, but the raw materials purchase price index fell in expansion territory to the lowest since September. Corporate profit margins are compressed, and they have to raise prices slightly at the sales end, but the increase is more limited.

In December, the manufacturing expectations index fell slightly in the expansion range, the market remains confident about the outlook, but there are also concerns about the contraction of customer budgets, fierce competition, and sluggish market conditions.

Wang Zhe, senior economist at Caixin Think Tank, said that in December 2023, the IS210DSVOH1AA prosperity of the manufacturing industry continued to improve, but the current internal and external demand is still insufficient, and the foundation for economic recovery still needs to be consolidated, especially the weak expectations of residents and enterprises, and the job market is under pressure. The Central government has proposed that the future policy orientation should adhere to the principle of “seeking progress while maintaining stability, promoting stability through progress, establishing first and then breaking”, and providing more policies conducive to stabilizing expectations, stabilizing growth, and stabilizing employment. Looking ahead to the New Year, there is still room for fiscal policy and monetary policy, and we need to further strengthen our policies to stabilize employment, give greater priority to employment, ease pressure on the job market, effectively improve people’s livelihood, and foster long-term confidence among market players.