Asia's Manufacturing Sector Faces Hurdles Amid Weak Chinese Demand

January revealed a mixed performance across Asia's manufacturing industry, hindered by the tepid demand in China, leaving the regional economies on unstable grounds as 2024 begins. The Caixin/S&P Global manufacturing purchasing managers' index (PMI) for China stood firm at 50.8 in January, indicating stability in the manufacturing sector as the score hovers above the 50-point threshold that demarcates expansion from contraction.

In contrast to the stable PMI, an official survey presented a less favorable view, with the manufacturing activity experiencing contraction for the fourth consecutive month. The presence of deflationary pressures hinted at a persistent weakness in demand within China, which may suggest a need for further policy support throughout the year.

Varied impacts were seen across Asia as differing economies coped with the weakened demand coming from China. South Korea saw its factory activity grow for the first time in over a year and a half in January, thanks to climbing demand in critical markets such as the United States and China itself.

Conversely, manufacturing activities in Taiwan and Malaysia contracted, and the Philippines reported slower expansion rates. The uneven surges in demand highlight the complexities facing the region's economies in the wake of China's economic slowdown.

Japan's Manufacturing and Industrial Outlook

Japan had its share of troubles, with manufacturing shrinking for the eighth consecutive month in January. Production and new order numbers dropped, affected by a halting of operations at Daihatsu, a Toyota Motor Corp subsidiary. Japanese manufacturers are bracing themselves for a steep drop in output by 6.2 per cent for January, influenced by Daihatsu's production halt and its ripple effect on the country's network of parts suppliers.

IMF's Projection on Asian Economies

The International Monetary Fund (IMF) has recently adjusted its growth forecasts, showing a projected 4.5 per cent expansion for Asia in 2024. This growth is fueled by robust demand from the United States and anticipated stimulus measures in China. However, the IMF indicated that this recovery would not be uniformly spread among Asian countries. Japan is projected to have a mere 0.9 per cent increase in growth, whereas India is set to boom with a 6.5 per cent expansion. As for China, the IMF is foreseeing a more modest economic expansion at 4.6 per cent, down from the 5.2 per cent growth in 2023.

Asia, China, Manufacturing