China's manufacturing sector braves headwinds amid policy support

BEIJING -- Facing uncertainties and challenges posed by the complex global environment and the sporadic resurgences of COVID-19 on the domestic front, China has scaled up support to help manufacturing firms tide over difficulties and ride the digitalization wave.

The latest data showed that the purchasing managers' index for China's manufacturing sector came in at 47.4 in April, down from 49.5 in March, according to the National Bureau of Statistics (NBS).

The resurgence of domestic COVID-19 infections has weighed on China's factory activities and market demand, NBS senior statistician Zhao Qinghe said.

On a brighter note, despite the influence of short-term factors, the stability of small and medium-sized enterprises has been firmed up as governments at various levels rolled out pro-growth policies to invigorate market entities, said Wen Tao, a researcher with China Logistics Information Center.

Analysts believe that China's sound long-term fundamentals have not changed, and the recent arrangements by authorities to smooth logistics and supply while strengthening policies to help enterprises tide over difficulties will further stabilize the market and bolster economic growth.

Scaled-up policy support

For Li Laibin, owner of a medium-sized textile company in Nantong city of Jiangsu province, 2022 is a challenging year due to the protracted impact of COVID-19 and price hikes in raw materials.

But thanks to the favorable tax treatment for manufacturing enterprises, Li's company has so far been allowed to defer the payment of taxes worth 1.52 million yuan (about $229,687), which mobilized capital and supported production activities.

The tax deferral Li's company has received offers a glimpse into a raft of incentives the government has offered to ease the financial burden for manufacturers.

Official data showed that the country's tax authorities have provided a total of 333.5 billion yuan in tax and fee deferrals for micro, small and medium-sized manufacturing firms nationwide in the first quarter of this year.

The Ministry of Finance also announced that the country's value-added tax credit refunds will reach approximately 1.5 trillion yuan this year, with priority to be given to micro and small firms and the manufacturing industry.

To help factories resume production amid COVID-19 disruptions, China established a "white list" approach to support the resumption of work for key companies in the industrial chain and minimize the impact of COVID-19 on the supply chain.

Smooth logistics nationwide must be ensured, while key industrial and supply chains, key infrastructure facilities as well as designated firms responsible for market supply during the epidemic should maintain normal operation, a key meeting held earlier this week has stressed.

Digitalization drive

For manufacturers, digitalization means decreased information asymmetry and increased supply chain transparency, enabling quality growth and allowing for better response to market fluctuations.

China will see 70 percent of its major manufacturing firms basically digitalized and build more than 500 industry-leading smart-manufacturing demonstration plants by 2025, according to a development plan issued by the Ministry of Industry and Information Technology (MIIT) with other departments.

During recent COVID-19 resurgences, the role of digitalization has become even more crucial in ensuring a dynamic and disruption-free real economy.

At recent meetings, the MIIT has urged efforts to make good use of 5G, the industrial internet and other digital technologies to help enterprises resolve difficulties and stabilize industrial and supply chains.

Looking ahead, efforts should be made to apply digital means to support cost reduction in financing and logistics of the manufacturing industry, and promote the steady operation and upgrade of the sector, said Zhu Minghao, a researcher with Beijing Jiaotong University.

Despite the headwinds, the driving force to promote the high-quality development of the manufacturing industry is still sufficient, Zhu noted.