Mar 02, 2020 09:45 AM

Chinese Manufacturers Haven’t Seen It This Bad in 16 Years, Caixin PMI Shows

Activity in China’s manufacturing sector in February contracted at the fastest pace in nearly 16 years due to record drops in new orders, output and employment amid the coronavirus outbreak, a Caixin-sponsored survey showed Monday.

The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), which gives an independent snapshot of operating conditions in the manufacturing sector, plunged last month to 40.3, the lowest reading since the survey began in April 2004. In January, the reading came in at 51.1. A number above 50 indicates an expansion in activity, while a reading below that signals a contraction.

The February reading was “weaker than 40.9 in November 2008 amid the global financial crisis,” said Zhong Zhengsheng, director of macroeconomic analysis with consultancy CEBM Group Ltd., a subsidiary of Caixin Insight Group. “The sharp decline was due to stagnant economic activity across the country disrupted by the pneumonia epidemic caused by a novel coronavirus.”


Since December, China has been grappling with a rapidly spreading coronavirus that had sickened over 80,000 people and killed more than 2,900 in the country as of Sunday. Governments’ efforts to contain the virus include suspending production of enterprises and factories and restricting transportation in many Chinese cities, disrupting domestic and global supply chains.

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“The supply and demand sides of the manufacturing sector were both weak,” Zhong said.

Total new orders placed with goods producers fell at the steepest rate on record last month, ending a seven-month period of rising new orders. Surveyed companies widely linked the decline to the coronavirus, according to the survey.

The gauge for new export orders remained in negative territory and last month plunged to the lowest point since January 2009 as a result of overseas shipping restrictions and order cancellations, the survey showed.

The output subindex plummeted into contractionary territory in February, falling to its lowest level on record after the reading had remained in expansionary territory since June. The plunge was a result of the coronavirus outbreak forcing manufacturing enterprises to shut down or suspend operations, the survey said.

Both the subindexes for employment and suppliers’ delivery times remained in contractionary territory and dropped to record lows last month. Headcount reduction pressured manufacturers’ working capacity, with the gauge for backlogs of work rising to its highest point since April 2005.

While the measure for output prices fell into contractionary territory in February, the gauge for input costs remained in expansionary territory despite a small drop. Zhong said companies have been under pressure to cut prices in the face of declining demand.

However, manufacturers widely expect production to rebound once restrictions related to epidemic control are lifted. The gauge for future output expectations, which measures how optimistic or pessimistic manufacturers are about their production over the next 12 months, rose to a five-year high in February.

“The economy will be able to see a significant rebound when the epidemic is gradually contained and companies accelerate the resumption of business amid more proactive fiscal and monetary policies,” Zhong said.

To help small businesses weather the epidemic, China’s financial regulators have lowered interest rates and cut fees and taxes for businesses on the frontlines of the fight against the coronavirus. Policymakers have also provided liquidity to prevent the interbank market from succumbing to a cash crunch as the virus hits confidence.

China’s official manufacturing PMI, released (link in Chinese) by the National Bureau of Statistics on Saturday, tumbled even more to a record low of 35.7 in February from 50 in the previous month.

The official PMI polls a larger proportion of big companies and state-owned enterprises than the Caixin PMI, which is sponsored by Caixin and compiled by London-based data analytics firm IHS Markit Ltd.

This story has been updated with additional information.

Contact reporter Tang Ziyi ( and editor Gavin Cross (

Read more about Caixin’s economic indexes.

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