China’s recent economic recovery may not be sustainable as yet

Beijing, March 31, 2021: China’s resumed industrial activity has contributed to an improvement in its Purchasing Managers’ Index in March, up from 50.6 to 51.9. This change is largely attributable to an acceleration in production after the New Year Holiday slump and post-pandemic recovery.

The news for non-factory based PMI is even more encouraging, and has surpassed the Bloomberg forecasts of 52, to rest at 56.3, resulting in higher expectations for service sectors which have recovered gradually. The same goes for the construction sector, according to Julian Evans-Pritchard, senior China economist at Capital Economics.

Manufacturing is slower to recover because of its dependence on imported raw materials with unpredictable lead times thanks to the pandemic. Experts fear this bounce back may not be permanent,

They believe a factor behind the “big rebound” was the repression of activity before and during the Lunar New Year holiday due to a rise in Covid-19 cases, leading to pent-up demand in March and the numbers therefore may not be indicative of a true recovery.

The current Covid resurgence in the US and Europe could derail new export orders, a key factor for the pick-up this month. The room for catch-up growth will diminish

And the current strength of exports is likely to unwind over the coming quarters as vaccinations allow a return to more normal global consumption patterns.

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