(Yicai Global) Jan. 3 -- Analysts and companies are optimistic about the outlook for China’s factory activity this year, expecting it to stage a robust turnaround after slowing to an almost three-year low last month as a wave of Covid-19 cases hit production.

The prospects are bright for long-suppressed market demand to fully recover amid government policy support and the easing of epidemic controls, according to Zhang Liqun, an analyst at the China Federation of Logistics and Purchasing.

China’s manufacturing purchasing managers' index fell for a third straight month in December, reaching 47, the lowest since March 2020, data from the National Bureau of Statistics showed on Dec. 31. The average last year was 49.1 percent, versus 50.5 in 2021. Meanwhile, the Caixin/Markit manufacturing PMI, a widely watched private gauge published today, fell for a fifth month in a row to 49 in December. Readings below 50 indicate contraction.

Most companies surveyed by the NBS expect the market to pick up with a gradual improvement in the Covid situation, Zhao Qinghe, a senior statistician at the bureau, pointed out.

Factory activity was disrupted last month as Covid-19 inflections began to rise across the nation after the government eased the country’s epidemic prevention and control policy.

The short-term impact of Covid-19 is expected to gradually abate, said Pang Ming, chief economist and research director at Jones Lang LaSalle Greater China. With the orderly implementation of measures to optimize epidemic containment and ongoing policies to stabilize the economy, the PMIs are expected to show a significant and comprehensive improvement this month, Pang said.

The official sub-index related to people’s livelihoods remained above 50, providing a solid guarantee for economic recovery and social development, the NBS’s Zhao also noted.

Changes in various sub-indexes showed Covid’s economic impact has expanded in the short term, said Wen Tao, an analyst at China Logistics Information Center. But looking at the manufacturing PMI’s trend, the economy is bottoming out, Wen added, noting that China has a good foundation for economic stabilization and recovery this year.

Editor: Futura Costaglione