Coronavirus: China manufacturing collapse confirmed as private sector factory survey hits record low

Caixin/Markit manufacturing purchasing managers’ index (PMI) plunged to 40.3 in February from 51.1 in January

Caixin survey, which focuses on smaller firms, mirrors huge drop in official PMI data, both of which show the impact of the coronavirus on manufacturers

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A worker works at a workshop in Harbin Dongan Automotive Engine Manufacturing in Harbin, northeast China's Heilongjiang Province. Photo: Xinhua

Published: 9:47am, 2 Mar 2020Updated: 2:15pm, 16 Mar 2020

A collapse in China’s manufacturing sector in February was confirmed on Monday, with a new survey of privately-owned producers emphasising the economic damage caused by the coronavirus epidemic.

The Caixin/Markit manufacturing purchasing managers’ index (PMI), a gauge of sentiment among the country’s smaller factory operators, plunged to 40.3 in February from 51.1 in January.

The weak data will reinforce expectations that China could report negative growth in the first quarter of 2020 for the first time since the Cultural Revolution in the late-1960s and early-1970s. It will also renew calls for Beijing to take more aggressive steps to support the economy.

The survey was well below market expectations for a drop to 46.0 and marks the lowest reading since the survey began in April 2004. It was weaker than 40.9 in November 2008 amid the global financial crisis.

The sharp decline was due to stagnant economic activity across the country disrupted by the pneumonia epidemic caused by a novel coronavirus

Zhengsheng Zhong

The Caixin index follows Saturday’s release of the official manufacturing PMI, which crashed to a record low of 35.7 in February, below the previous trough of 38.8 reached in November 2008 at the start of the global financial crisis, the National Bureau of Statistics said.

The survey for the official gauge covers more larger and state-owned firms, while the Caixin survey covers smaller firms. A reading below 50 means activity in the manufacturing sector is contracting. The further below 50 the index falls, the larger the contraction.

Factories in China traditionally close during the Lunar New Year holiday, but this year the shutdown was extended in an effort to contain the coronavirus outbreak. Manufacturers are now struggling to resume operations, with many workers unable to return due to continued travel restrictions.