Chinese Demand Buoys Outlook for its NeighborsFebruary 03, 2023
With Caixin China PMI numbers today broadly confirming Monday’s official CCP data, the outlook for China and its neighbors remains bright. The general trends shown in the Caixin PMIs reflect those of Japan and South Korea. Manufacturing held steady or gained slightly across Asia in the face of rising local prices and input costs, as well as export headwinds from appreciating currencies. Japanese and Chinese services saw the largest increase for January, pulling the Caixin composite into expansionary territory.
Japan’s January PMIs were finalized today and also paint an encouraging picture. As in China, manufacturing holds steady, and services led composite up to an expansionary level.
South Korea’s manufacturing PMI data for last month matches this trend as well. A slight uptick shows respondents weighing confidence from growing demand in China against weakening relative export strength against competitors.
Expectations for China’s service sector jumped drastically to their highest level in five years, indicating a profound optimism that, importantly, does not rely on Chinese manufacturing and exports. This confidence could prove to be a significant tailwind for economic activity in the region as a whole.
Future expectations around the region seem to echo this sentiment, with manufacturing leading the way.
With roaring Chinese demand providing a floor for Japanese and South Korean manufacturing, and steadily increasing travel to and from China bolstering services demand in East Asia’s big three economies, things are undeniably looking up in the region most suppressed by COVID and its attendant restrictions.