BEIJING- China’s factory activity likely grew at a slower pace in March, a Reuters poll showed on Wednesday, suggesting the economic recovery is uneven in the light of weak global demand and a property slump.
The official manufacturing purchasing managers’ index (PMI) is expected to have slowed to 51.5 in March, compared with 52.6 in February – the fastest pace in more than a decade – according to the median forecast of economists in a Reuters poll.
An index reading above 50 indicates expansion in activity on a monthly basis and a reading below indicates contraction.
The world’s second-biggest economy has seen a gradual recovery in the first two months of 2023. Industrial output was 2.4 percent higher than a year earlier and retail sales jumped 3.5 percent on year, official data showed.
However, the manufacturing sector’s recovery may take time as factory operations are struggling to fully shake off the long-term effects of Beijing’s protracted zero-COVID policy which it ended in December. Uncertainties from the global banking crisis and fallout on global economies will also affect demand for China’s goods, adding to pressure on manufacturers.
China has set a modest annual growth target of around 5 percent this year after significantly missing its target for 2022.
Premier Li Qiang said the government will maintain a certain level of economic expansion as it speeds up a transition towards higher quality growth, according to state media on Monday.
The official manufacturing PMI, which largely focuses on big and state-owned firms, and its survey for the services sector, will be released on Friday.
Meanwhile, mega private refineries are expected to operate at full processing rates or higher until April as their margins have improved after the government lifted COVID-19 restrictions, company officials said on Wednesday.
The rise in crude demand at Zhejiang Petrochemical (ZPC) and Hengli Petrochemical, which account for 6.5 percent of China’s refining capacity, will lift crude imports by the world’s top importer, with volumes expected to hit record levels this year and support global prices.
ZPC’s 800,000 barrels per day (bpd) refinery in Zhoushan city increased its run rate to 100 percent in February, a company official said, adding that run rates should be “no lower than that now”.
Hengli’s 400,000 bpd refinery in the city of Dalian is operating at 107 percent to 108 percent, a company official said.
Higher fuel output from them could offset an expected fall in supplies from planned maintenance by state-owned majors in April and May, traders said.
Both ZPC and Hengli are China’s top polyester producers and their plants produce large amounts of paraxylene (PX), a raw material for plastic bottles and synthetic fiber.
The margins for producing PX from naphtha have improved, rising by at least $100 a ton at the end of March, compared with the end of February, a trading analyst said.
Chinese petrochemical buyers, including ZPC and Hengli, have cut imports recently as they ramp up output, a Singapore-based petrochemicals broker said.
However, new start-up Shenghong Petrochemical is running its 320,000-bpd CDU below full rates because of production issues at its reformer unit, two sources said.
