China extracts a lot more coal again and this boosts its factories – .

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China extracts a lot more coal again and this boosts its factories – .



A government survey on manufacturing activity was brought to 50.1 in November compared to 49.2 in October, according to data released Tuesday by the National Bureau of Statistics (NBS). It was the first reading above 50 – indicating expansion rather than contraction – in three months. It was also the first time since March that the index had increased from the previous month.

Beijing on Tuesday attributed the improvement to “recent policy measures” that have boosted energy supplies and stabilized soaring costs.

“In November, power shortages eased and the prices of some raw materials dropped significantly,” Zhao Qinghe, senior statistician of NBS, said in a statement.

But while the official numbers are promising, data from a private survey this week doesn’t paint a solid picture. Caixin’s PMI survey said on Wednesday that China’s manufacturing industry for November had slipped into contractionary territory, falling to 49.9 from 50.6 in October. A reading below 50 indicates contraction rather than expansion.

The difference between the two surveys can be attributed to the methodology – Caixin looked at small businesses and private firms, while the government focused on the larger ones.
Wang Zhe, senior economist at Caixin Insight Group, highlighted the problems facing small businesses in China, including deteriorating employment and high raw material costs. He added in a statement accompanying the data that policymakers “should always focus on supporting small and medium-sized businesses.”

Even so, surveys taken together “still suggest that industrial production rebounded in November as power shortages eased,” according to a report by Sheana Yue, deputy economist for Capital Economics.

China has been grappling with the power crisis for months, as extreme weather conditions, increased energy demand and strict limits on coal use have dealt a triple blow to the country’s electricity grid.

The problem came to a head in September, when companies were asked to limit their energy use in order to reduce the demand for electricity. The supply was cut in some houses, even trapping people in the elevators.

The energy crisis, as well as soaring raw material costs, led to a sharp drop in industrial production in September and October. To combat the problem, the authorities relaxed their efforts to reduce carbon emissions and ordered coal mines to increase production.

The result was notable. China – which uses more than half of the world’s coal supply and is already the largest emitter of carbon – set a new daily coal production record in mid-November, according to statistics from the National Commission for development and reform (NDRC).

The agency’s “strong interventions” alleviated the “global electricity shortage” and eased cost pressures on some industries, Citi analysts wrote in a Tuesday research report. Electricity problems had driven up the cost of aluminum, steel and other raw materials, spilling over into industries such as car manufacturing and construction.

Stress yet to come?

But there could be continued pressure on industrial production in the coming months, resulting from China’s readiness for the upcoming Winter Olympics, an ongoing real estate crisis, and the potential impact of the new Omicron variant of the coronavirus.

Citi analysts said production of raw materials – which causes high levels of air pollution – could be limited in northern China as the government tries to “secure blue skies for [the] Beijing Winter Olympics. “

Another risk is the slowdown in China’s real estate sector.

Data from Tuesday showed while new orders received by factories rebounded somewhat, this gauge has still not entered expansion territory, suggesting that domestic demand remains weak.

“The major challenge now is the significant pressure that the downturn in real estate is putting on aggregate demand,” Citi analysts said. Real estate – and related industries – accounts for up to 30% of China’s GDP.

Data from Tuesday also showed this The non-manufacturing PMI, which measures the performance of the service and construction sectors, reached 52.3 in November, slightly below October’s 52.4.

Analysts say the Omicron variant could be of concern in the future, especially for the service industry.

The latest variant of the coronavirus has been called “worrying” by the World Health Organization because of its apparently rapid spread in South Africa and its many disturbing mutations. While specific details of the new variant have yet to be spelled out, several countries have rushed to impose travel bans.

China, however, has long pursued a “zero Covid” approach and maintains what is already among the toughest border restrictions in the world.

“Looking ahead, most of the service weakness is expected to reverse in December unless – obviously a big caveat with the emergence of Omicron – there are new outbreaks,” wrote economists with Capital Economics in a research report Tuesday. “In that case, the authorities would look to tighter controls to contain it. “

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