COVID disruptions, declines in both supply and demand chief culprits

China's factory activity contracted at a steeper pace in November amid renewed domestic COVID-19 cases and slackening domestic and external demand, adding pressure to the country's slow and bumpy economic recovery, experts said.

They called for more efforts to promote economic growth to a reasonable level, with a key focus on expanding effective demand, spurring consumption and stabilizing the property market.

Given the country's effective measures to stabilize the economy and contain the pandemic, as well as its complete industrial chains and ultra-large domestic market, they believe the country has the ability to cope with economic challenges despite pressures, and the economy will likely gradually stabilize.

Their comments came as data from the National Bureau of Statistics showed on Wednesday that the official purchasing managers index for China's manufacturing sector fell to 48 in November from 49.2 in October. That was the lowest since April.

Zhao Qinghe, a senior statistician with the NBS, said China's factory activity shrank in November amid renewed COVID-19 outbreaks and a more complicated and grimmer international environment.

Zhao linked COVID disruptions to declines in both supply and demand in the manufacturing sector.

A subindex for production came in at 47.8 versus 49.6 a month earlier. A gauge of new orders came in at 46.4 compared to 48.1 in October, with the new export order subindex declining to 46.7 from 47.6, which marks 19 consecutive months in contraction territory.

China's nonmanufacturing PMI came in at 46.7 from 48.7 in October. Also, the country's official composite PMI, which includes both manufacturing and services, registered 47.1 in November compared with 49 in October, according to the NBS.

Lu Ting, chief China economist at Nomura, said the November official PMIs were weaker than market expectations due to the rapid growth of COVID case numbers in a growing number of cities.

Looking to December, Lu said his team expects the official manufacturing PMI to remain weak at around 48.

Zhou Maohua, an analyst at China Everbright Bank, said November factory activity shrank amid slackening domestic and external demand, and the sharper slide in the nonmanufacturing sector was mainly affected by services disruptions due to COVID-19.

Zhou warned of the challenges and difficulties faced by some manufacturing enterprises and the services sector as well as weakening market expectations, saying more efforts should be made to ensure industrial and supply chains run smoothly, step up financial support for weak links in the real economy and better implement existing stimulus policy measures on ensuring stable supplies and prices, stabilizing the property market, easing pressure on firms as well as stabilizing investment.

Despite pressures and challenges ahead and COVID disruptions, Zhou said the economy may continue to recover gradually with the government's consolidated moves to step up policy support.

A recent State Council executive meeting said China will take solid steps to ensure full and effective implementation of the policy package for stabilizing the economy and its follow-up measures to consolidate the foundation of economic recovery and growth, including expediting the construction of key projects, accelerating equipment upgrading and renovation, stabilizing and expanding consumption, continuing efforts to ensure smooth transportation and logistics and scaling up financial support for the real economy.