China’s strong recovery shows signs of peaking as PMIs ease

Bloomberg

China’s economic recovery could be past its peak and beginning to stabilise as the year draws to a close, with a key manufacturing gauge moderating in December after an export-fueled boost to production.
The official manufacturing purchasing managers’ index (PMI) fell to 51.9 from a three-year high of 52.1 in November, the National Bureau of Statistics said, lower than the median
estimate of 52 in a Bloomberg survey of economists. The non-manufacturing gauge, reflecting activity in the construction and services sectors, dropped to 55.7 from 56.4.
While the figures are still above the 50-mark, indicating improving conditions from the previous month, the drop in the manufacturing index was the biggest decline since May. That suggests a moderation in the pace of industrial growth, which has so far been benefiting from the resumption of everyday life in China and overseas demand for pandemic-related goods.
“It’s a gradual plateauing,” said Bo Zhuang, chief China economist at TS Lombard. “We have passed the peak of the strong recovery, as suggested by exports and industrial shortages. I think the PMI from here might be peaking as the credit growth is peaking out.”
The sub-index for new export orders moderated slightly to 51.3 in December from 51.5, suggesting normalisation in demand following a seasonal surge for the Christmas holidays.
“It is still a level that is consistent with very solid growth,” Qian Wang, Asia-Pacific chief economist at Vanguard Group said. “The Chinese economy seems to be holding up pretty well in spite of the second wave on the external side”.