(Yicai Global) Dec. 1 -- A widely watched private survey shows that China’s manufacturing activity in November slipped below 50 into contraction territory, after two months above the benchmark, as the country’s factories continue to be held back by the ongoing Covid-19 pandemic and both domestic and overseas demand remain weak.

The Caixin purchasing managers’ index for manufacturing dipped 0.7 percentage point to 49.9 last month from October, according to data released today by financial media group Caixin.

This is not in line with the figures released by the National Bureau of Statistics which logged a rise of 0.9 percentage point to expansion territory at 50.1 for November. Caixin PMI data tends to focus on small and medium-sized firms and has a sample size of 430, while the national survey canvasses 2,000 big enterprises and is generally regarded as a better reflection of the overall economic situation.

Supply was strong, but demand was weak. The manufacturing production sub-index climbed back into positive territory in November after three straight months of contraction, as the power shortage was resolved. However, the new orders sub-index slumped below 50 and the new export orders sub-index stayed under the benchmark for the fourth month in a row as the pandemic continues to play havoc with demand.

Government policies must remain focused on bailing out small and medium firms and also pay attention to the deteriorating employment situation, residents’ limited income growth and weak purchasing power, said Wang Zhe, a senior economist at Caixin’s think tank. The prices of some raw materials are still high, putting great pressure on companies and inflation must also be addressed, he added.

Companies employed fewer people despite the uptick in production. The employment rate remained below 50 for the fourth consecutive month, and it fell at a faster pace than in October. Makers of consumer goods, in particular, were not hiring.

Manufacturers were more optimistic last month than in October and are anticipating the pandemic to ease further, demand to rise and supply chains to recover, Wang said. The manufacturing prosperity index was stable in November. Higher downward pressure and smaller inflation pressure were striking features in the economy.

Editor: Kim Taylor