The post-lunar Chinese economic picture is taking shape, with small and medium-sized private companies struggling due to the increase in production costs and the possible consequences of inflation. March’s Caixin / Markit manufacturing PMI, which records the performance of the private sector, fell to a nearly one-year low to 50.6 versus the expected 51.4 (the previous month it was 50.9 ). The central bank opens up to capital flows to ease tensions on the yuan.
Due to the sharp increase in costs, at most in 40 months, the private sector also slows down, aligning itself with the trend of large state-owned companies whose PMI, just released, were 51.9 in manufacturing in March (expected 51.2) and 56.3 in services (expected 52.0).
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The effects on employment
“We should pay attention to inflation in the future because the indicators for input and output prices have been rising for several months,” said Wang Zhe, economist at Caixin Insight Group. “Rising inflationary pressure limits the space for future policies and it is not a good thing to support an economic recovery in the post-epidemic period.”
Companies, meanwhile, cut staffing levels for the fourth consecutive month. This is not a good sign if you consider that in his speech to Parliament in Plenary on March 5, Premier Li Keqiang promised 11 million new jobs in urban areas in 2021.
On the other hand, the Chinese situation finds a more generalized confirmation also in the Asian trend, also characterized by strong pressure on costs. The recovery of production in Asia increases the pace, but pressures on production costs are emerging.