Key investment points:
Event on December 31, 2021, the service industry survey center of the National Bureau of statistics and China Federation of logistics and procurement released the China procurement manager index. Among them, the manufacturing PMI index was 50.3%, up 0.2 percentage points from the previous month. The non manufacturing PMI index was 52.7%, up 0.4 percentage points from the previous month.
The policy continued to exert force, the manufacturing PMI continued to rise, the policy results continued to show, and the manufacturing PMI index rose slightly. In December, the manufacturing PMI index was 50.3%, up 0.2 percentage points from the previous month and rebounded for two consecutive months. In terms of sub items, except that the production index fell slightly compared with the previous month, the other sub items were improved compared with the previous month. In terms of enterprise scale, the PMI of large and medium-sized enterprises increased by 1.1 and 0.1 percentage points respectively compared with the previous month, while the PMI of small enterprises decreased by 2.0 percentage points compared with the previous month. The production index fell seasonally, but it is still in the boom range. In December, the PMI production index was 51.4%, down 0.6 percentage points from the previous month. Affected by the cold wave and cooling weather, with the approaching of new year’s day and Spring Festival holidays, the speed of production expansion has slowed down. However, considering the continuous efforts of stable economic policies such as ensuring supply and stabilizing price in the near future, the expectation of enterprise production and operation activities is relatively high, driving the production index to remain in the boom range.
Orders continued to improve and domestic demand repaired. In December, the new order index was 49.7%, up 0.3 percentage points from the previous month. It improved for two consecutive months, but still below the critical point. In terms of industry conditions, the new order index of high-tech manufacturing industry was 56.1%, an increase of 2.9 percentage points over the previous month, and the market demand of pharmaceutical, automobile, computer communication electronic equipment and other industries was accelerated. In terms of external demand, exports have declined, but the range is limited. In December, the new export order index was 48.1%, down 0.4 percentage points from the previous month. The rapid spread of Omicron virus overseas has disturbed the repair of overseas economies, gradually dissipated the effects of Christmas and new year’s Day holidays, and shipping has not been significantly alleviated, resulting in a certain decline in exports. However, due to the repeated overseas epidemics, the demand for epidemic prevention materials has increased, and the return of orders in Southeast Asia has led to a limited decline in exports as a whole. In the next stage, with the spread of Omicron virus, the situation of overseas epidemic prevention and control is difficult to get a significant improvement in the short term, and the logic of orders returning to China from Southeast Asia remains unchanged. At the same time, the continued demand for replenishment in the United States and other countries will also underpin exports, but we still need to pay attention to the impact of the recurrence of the epidemic on the global economic recovery. In terms of domestic demand, it needs to be repaired. In December, with the continuous implementation of policies such as ensuring supply and stabilizing price, the pressure on the cost side of enterprises was further alleviated, driving the improvement of demand. At the same time, new year’s day and Spring Festival holidays are approaching, and the consumer goods industry has also entered the traditional peak season to further support domestic demand. In the next stage, the central economic conference in December reiterated the demand for stable economic growth, requiring appropriate and advanced infrastructure investment to underpin the economy. The Ministry of finance has also issued the amount of special bonds approved in advance in 2022, which is expected to further accelerate infrastructure investment and continuously improve domestic demand. However, considering the repeated epidemic situation in some areas and the shutdown in winter, the extent of domestic demand repair still needs to observe the actual situation of infrastructure development.
Prices continued to fall. Enterprises accelerated the preparation of goods. In December, the purchase price of PMI fell 4.8 percentage points to 48.1%, and the ex factory price of PMI fell 3.4 percentage points to 45.5%. The difference between PMI ex factory price and purchase price was – 2.6%, an increase of 1.4 percentage points over the previous month. With the continuous promotion of the policy of ensuring supply and stabilizing price, the rising trend of price has been continuously curbed, and the profit space of enterprises has been continuously repaired. In terms of various data, enterprises speed up the preparation of goods. The inventory of finished products in December was 48.5%, an increase of 0.6 percentage points over the previous month; Raw material inventory was 49.2%, up 1.5 percentage points from the previous month. In December, the purchase volume index increased by 0.6 percentage points to 50.8% compared with the previous month, which is reflected in the high production and operation expectations of enterprises and the phenomenon of accelerating goods preparation under the background of continuous easing of supply constraints.
The employment data improved. In December, the number of manufacturing employees was 49.1%, up 0.2 percentage points from the previous month, and the number of non manufacturing employees was 47.6%, up 0.3 percentage points from the previous month. With the gradual emergence of the effect of the policy of ensuring supply and stabilizing price, the pressure on the cost side of enterprises has been alleviated, the production and operation expectation has been continuously improved, and the working climate has been improved.
On the whole, with the continuous efforts of stable economic policies such as ensuring supply and stabilizing price, the manufacturing PMI index rose for two consecutive months. However, under the influence of cold wave weather and winter shutdown, production declined. Although domestic demand has improved, the repair range is relatively limited under the background that the infrastructure has not yet made significant efforts. The downward trend of superimposed external demand remains unchanged, and the demand constraints still exist. The infrastructure development under the steady growth policy is still needed to break the situation.
In the next stage, on the production side, with the increasing efforts of the steady economic growth policy, the enterprise production may be further improved. However, considering the impact of cold wave weather and local epidemic, the marginal improvement range of production may be restricted to some extent.
On the demand side, in terms of external demand, with the spread of Omicron virus, the situation of overseas epidemic prevention and control is difficult to be significantly improved in the short term. The logic of Southeast Asian orders returning to China remains unchanged, superimposed on the continuous replenishment demand of the United States and other countries, and the resilience of exports still exists under the downward trend, but we need to pay attention to the impact of repeated epidemics on global economic recovery. In terms of domestic demand, with the central economic work conference in December reiterating the demand for stabilizing the economy and requiring moderately advanced infrastructure investment, infrastructure may be further strengthened and domestic demand will be further repaired. However, we still need to pay attention to the progress of local epidemic prevention and control, the location of relevant policies and the disturbance of winter shutdown to infrastructure development.
The risk suggests that the epidemic prevention and control is less than expected, the inflation is higher than expected, and the policy implementation is less than expected.
