The year-end economic report released by the National Bureau of Statistics in China paints a picture of cautious optimism for December 2024. The Purchasing Managers' Index (PMI) for manufacturing stood at 50.1%, reflecting a slight dip of 0.2 percentage points from the previous monthHowever, it remains steady in the expansion zone, indicating that the manufacturing sector continues its positive trajectory for the third consecutive monthEqually promising, the non-manufacturing business activity index and the comprehensive PMI output index both logged in at 52.2%, marking a significant increase of 2.2 and 1.4 percentage points from the prior month, respectively.

Senior statistician Zhao Qinghe, from the services survey center of the National Bureau of Statistics, expressed that these three indices being in the expansion zone suggests that enterprises are ramping up their production activities

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This is a clear sign that the overall economic confidence within China is recovering strongly.

As 2024 drew to a close, the macroeconomic policies in play demonstrated a cumulative effect, contributing to the manufacturing PMI of 50.1%. Detailed breakdowns of the indices reveal a quickening recovery in market demand, with companies experiencing robust growth in productionLarge enterprises are seeing stable growth, while medium-sized companies are gradually bouncing back.

Both supply and demand indices have remained above critical thresholdsWith persistent policy measures making their impact felt, the market demand is stabilizing and acceleratingThe new orders index reached 51%, up by 0.2 percentage points compared to the previous month, marking four months of consecutive gainsMeanwhile, exports have also begun to stabilize, as indicated by a new export orders index of 48.3%, up by 0.2 percentage points and maintaining an upward trend for two months

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As the overall demand improves alongside expectations of a robust year-end consumption peak, manufacturers are maintaining a strong willingness to produceThe production index, although slightly down by 0.3 percentage points to 52.1%, continues to reflect a solid growth pattern, showcasing that manufacturing remains resilient and growing steadily during the fourth quarter of 2024. To meet production needs, businesses are increasing their procurement efforts, with the procurement volume index at 51.5%, which is a 0.5 percentage point increase from last month, indicating two months of expansion.

Experts from the China Logistics Information Center, particularly Wen Tao, highlighted the noteworthy growth in consumer market demandThe implementation of the "two new" policies has injected substantial momentum into the consumer market, especially as the year-end spending rush approachesThe consumer goods manufacturing sector experienced a significant acceleration in demand, with the new orders index in this category climbing nearly 1 percentage point to reach over 53%.

The non-manufacturing sector also mirrored this positive trend, with its business activity index hitting 52.2% in December, which is the highest level since April 2024, reflecting an increase of 2.2 percentage points from last month

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Meanwhile, the new orders index in the non-manufacturing sector surged to 48.7%, another new high not seen since July 2023, rising by 2.8 percentage points.

In the service industry, the business activity index reached 52%, increasing by 1.9 percentage points and marking a high point since April 2024, indicating an acceleration in service sector expansionOf the 21 industries surveyed, 17 showed business activity indices that exceeded previous months, signalling a widespread recovery in industry health.

The construction industry commanded particular attention, experiencing considerable growth with an index of 53.2%, a 3.5 percentage point rise from the previous monthThis surge can be attributed to various factors, including companies hastening their project timelines in anticipation of the approaching Spring Festival holidays.

As noted by Cai Jin, president of the China Logistics and Purchasing Federation, the concerted increase in both supply and demand has led to a stabilization in non-manufacturing prices, the employment rate, and steadily rising business confidence

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The input price index climbed above 50%, while the sales price index remained constant compared to last month, with a slight rise in the employment index and a continuous increase in business activity expectations observed over the past three monthsThese indicators for the fourth quarter were all higher than those recorded in the third quarter.

Overall, the current scenario depicts a tug-of-war between factors fostering economic rebound and market-led demand contraction, amidst downward pressures on the economyIt is crucial, therefore, to adhere to the guidelines set forth in the central economic work conference and expedite the rollout of stronger macroeconomic policiesThis includes a significant increase in government investment in public goods alongside swift action to boost enterprise orders, which will help to sustain a warming in production activity.

In the non-manufacturing sector, the average business activity index for the fourth quarter stood at 50.8%, which is a 0.6 percentage point improvement on the previous quarter

The average new orders index was at 47.3%, rising by 1.9 percentage points from the third quarter, indicating that the operational outlook for non-manufacturing sectors has improved.

Furthermore, according to experts like Wu Wei from the China Logistics Information Center, the fourth quarter witnessed a continuous positive shift in non-manufacturing operations as several policy measures began to yield tangible resultsActivities related to investment and consumption have demonstrated signs of improvement, and connections between economic indicators have become more apparent, leading to a notable enhancement in market confidenceThis sets a solid foundation for sustainable growth as we enter 2025.

Wen Tao concluded by emphasizing that December 2024 closed with stable economic performance, and the fourth quarter rebounded, laying a solid groundwork for the start of 2025. The central economic work conference emphasized the implementation of a more proactive fiscal policy and moderately relaxed monetary policy, advising on a strategic mix of policies to tackle nine prioritized tasks in 2025. With these coordinated and effective policies, it is anticipated that the economy will continue on an upward trajectory, achieving high-quality completion of the goals outlined in the 14th Five-Year Plan.