(Yicai Global) April 1 -- China’s manufacturing activity declined at the fastest pace in more than two years last month, as production and demand fell sharply because of the resurgence of Covid-19 in the country, according to a widely-watched private survey.

The Caixin purchasing managers’ index for manufacturing was 48.1 in March, down from 50.4 in February and the lowest since February 2020, when the first Covid-19 setback was recorded, according to data financial media group Caixin released today. A reading below 50 indicates a contraction.

It was the second contraction in China’s factory activity since the start of 2022.

“China is facing the most severe wave of Covid-19 since the beginning of the pandemic in 2020 and uncertainties dominate the overseas stage,” said Wang Zhe, senior economist at Caixin Insight Group.

“A number of factors resonate, aggravating the pressure on China’s economy and increasing the risk of stagflation,” Wang said. “Policymakers should care about vulnerable groups and enhance the support for key industries and micro- and small-sized businesses to stabilize market expectations.”

The decline was in line with the official manufacturing PMI published by the National Bureau of Statistics yesterday. That figure came in at 49.5 for last month, contracting for the first time since last October.

The Caixin PMI’s new export order sub-index also fell at the fastest pace in 22 months, weighed down by the Russia-Ukraine conflict.

Manufacturers were less confident about production prospects for this year, the survey showed. The measure of future output expectations dropped to two points lower than the average, mainly because of the uncertainty caused by Covid-19, the Russia-Ukraine conflict, and surging raw material prices.

China’s official PMI surveys 3,000 medium- and large-sized companies, while the Caixin PMI polls about 500 small and mid-sized firms.

Editor: Futura Costaglione