External Demand Improves but Employment Remains Weak, Economic Shortcomings Still to Be Addressed (AI Translation)

【周刊提前读】外需改善但就业低迷 经济短板仍待补齐

In March 2024, China experienced a significant acceleration in its economic expansion, reaching levels of prosperity not seen since June 2023. This growth was evidenced by the increase in the Caixin China Manufacturing Purchasing Managers' Index (PMI) to 51.1 and the Services PMI to 52.7, indicating improvements across both major sectors [para. 1]. The National Bureau of Statistics also reported increases in its Manufacturing PMI and Service Business Activity Index, with the Composite PMI Output Index hitting its highest point since June 2023 [para. 2]. Despite these positive trends, concerns remain regarding employment contraction and price levels hovering around the break-even point, suggesting that while there is optimism for economic recovery, challenges such as job market stress and insufficient effective demand persist [para. 3].

The manufacturing sector showed particular strength in March, with improvements across several sub-indices including production, new orders, and new export orders—the latter reaching its highest level since March 2023. This suggests that external demand has played a crucial role in driving this expansion. However, deflationary pressures remain a concern as indicated by low raw material purchase price index and factory price index values [para. 4]. External demand outperformed domestic demand during this period, with manufacturing PMIs from other countries like the United States, Japan, and the United Kingdom also showing improvement. South Korea's exports growth further supports the notion of a recovering global technology cycle [para. 5].

Small enterprises exhibited notable improvement according to the National Bureau of Statistics' PMI data, suggesting sensitivity to export demand and service industry demand among these businesses. This aligns with expectations for low global inventories and improving external demand conditions in 2024 [para. 6]. The services sector also continued to improve in March; however, despite rebounds in certain indices like New Business Index and Business Expectations Index, challenges such as employment below the boom-bust line for two consecutive months were noted [para. 7].

Despite exceeding expectations in early 2024 leading to an upward revision of GDP growth forecasts for Q1 year-over-year from around 4.5% to approximately 5%, weaknesses such as insufficient effective demand and differentiation between upstream and downstream industries still need addressing. High-frequency data indicates strong performance in mid- and downstream sectors but weaker than seasonal levels in upstream sectors like steel and cement production [para. 8]. The construction industry's business activity index rose less significantly compared to similar seasonal years past due to sluggish real estate investment and localized debt constraints on infrastructure projects [para. 9].

To achieve its ambitious GDP growth target of around 5% for 2024 set by the Government Work Report, China introduced measures including a trillion yuan ultra-long-term special government bond aimed at funding major national strategies. The detailed implementation of these policies will be crucial for supporting economic recovery amid challenges such as weak confidence and sluggish real estate market conditions [para. 10]. Continuous price slumps may offer opportunities for boosting prices through supply-side regulation under energy consumption reduction targets and investment guidance in key industries [para. 11].