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Asia's Industries close 2023 on a Sour Note, owing to China's Shaky Recovery

Asia Manufacturing Review Team | Tuesday, 02 January 2024

 Asia Manufacturing Review Team

Asia's factory activity fell in December, indicating a wobbly start for the region's manufacturing powerhouses in 2024 as China's sluggish economic recovery hampered a larger improvement in demand.

A series of purchasing managers' indices (PMIs) issued by S&P Global on Tuesday showed that manufacturing activity in most Asian economies continued to fall at the end of last year, with confidence largely sinking.

The troubles of Asia's tech-heavy economies continued, with South Korean manufacturing activity declining again and Taiwan contracting for the 19th month in a row, according to PMIs.

The Caixin PMI in China unexpectedly increased activity in December, in contrast to Beijing's official PMI, which stayed in contraction territory for the third month in a row. China's uncertain economic prospects continue to darken the picture for its key trading partners.

"Overall, the economic outlook for (China's) manufacturing sector continued to improve in December, with supply and demand expanding and price levels remaining stable," according to Wang Zhe, Senior economist at Caixin Insight Group.

"However, employment remained a significant challenge, and businesses expressed concerns about the future, remaining cautious in areas including hiring, raw material purchasing, and inventory management."

Beijing has implemented a slew of reforms in recent months to bolster a shaky post-pandemic recovery, but the world's second-largest economy is failing to gain traction amid a severe property collapse, local government debt worries, and tepid global demand. Elsewhere in Asia, PMIs revealed that manufacturing activity in Malaysia and Vietnam remained contractionary, albeit it accelerated modestly in Indonesia.

India's PMI for the previous month will be revealed on Wednesday, while Japan's will be released on Thursday. While Asia's December PMIs were generally negative, other recent data show that the region's post-pandemic recovery is gaining steam.

Singapore's GDP increased year on year in the December quarter, aided by stronger construction and manufacturing, according to figures released on Monday. South Korean exports increased in December, but at a slower pace, as weaker Chinese demand offset healthy worldwide semiconductor sales, according to data released on Monday.