China business activity picks up

The Chinese economy’s 11-month slump could be over, as manufacturing activity begins to pick up once more

The Shenzhen Stock Exchange building in Shenzhen, China. Recent data has suggested that, after months of poor performance, China's economy may be stabilising 

New data suggests that the Chinese economy may be stabilising, easing fears over its health following its recent slowdown. According to the Caixin China General Services PMI, overall business activity in China picked up in March 2016, reversing the slight dip that it experienced in the previous month. At 51.3, the composite index figure for March was at its highest for 11 months.

The index noted that the modest gains in activity were “driven by slightly stronger growth of services activity and a renewed expansion of manufacturing output”. The service sector performed the strongest, with the Caixin China General Services Business Activity Index “posting at 52.2, up from 51.2”.

Manufacturing, meanwhile, made only marginal growth gains. However, these increases mark a reversal of the past 11 months of stagnant or reduced output.

A manufacturing rebound has also been recorded in other indictors. The Financial Times noted that official government data from March “showed industrial profits rose 4.8 per cent in January and February compared to a year earlier and in contrast to a fall of 4.7 per cent in December”. This rise put an end to the previous seven-month succession of a contraction in profits.

If these gains are able to hold, fears regarding China’s slowing growth and its potential ‘hard landing’ may be calmed. The importance of the Chinese economy to the overall health of the world economy has become increasingly apparent in recent years, while a preview of a chapter in the IMF’s Global Financial Stability Report has warned of increasing spillover from China and other emerging markets.