Chinese factory activity returned to expansion in September, coinciding with accelerating growth in the services sector, in indications of improved momentum in the world's second-largest economy, supported by waning weather disturbances and demand related to artificial intelligence. However, the continued weakness in consumption and investment and the real estate crisis reveal that the recovery is still unbalanced, and reinforce expectations for continued government support.
The official purchasing managers' index for the industrial sector rose to 50.1 points in September, from 49.8 points in August, ending two consecutive months of contraction, according to the National Bureau of Statistics. The reading was in line with the expectations of a Reuters poll. A reading above 50 points indicates growth in activity, while a reading below it means contraction.
Details showed an improvement in demand and production, as the new orders sub-index reached 50.5 points, while the production index recorded 51.7 points.
Hao Zhu, an economist at Guotai Haitong Securities, said that China's financial push appears to have begun to gain momentum, and that September data indicates that the economy has moved to a higher pace, but he considered that the most important factor is the ability of real estate support measures to improve consumption by reducing household debt burdens.
A special survey reinforced indicators of industry improvement, as the Rating Dog Index for industrial purchasing managers rose to its highest level in five months at 52.1 points, from 51.5 points in August.
China continues to rely heavily on exports and industrial production to compensate for weak domestic demand and the prolonged real estate decline. The merchandise trade surplus is set to exceed $1 trillion for the second year in a row, but escalating trade frictions and geopolitical risks threaten the sustainability of this engine.
Beijing has intensified its measures to support the economy, and on Tuesday announced measures to direct cheaper financing to sectors including infrastructure and technology, along with expanding support for home buyers. This comes after the economy grew by 4.3 percent during the second quarter, which is the slowest pace in more than three years, while the government targets annual growth ranging between 4.5 and 5 percent.
Non-industrial activities also improved, as the official index, which includes services and construction, rose to 50.2 points in September, compared to 49 points in August. The special survey showed a stronger picture for the services sector, as the Rating Dog index for services rose to 51.6 points, the highest level in three months, compared to 51.4 points in the previous month. New business recorded the fastest growth since June, supported by improved demand and an acceleration in export orders.
Employment in services rose for the fifth month in a row, although the pace of hiring slowed to the lowest level in four months. On the other hand, the prices of products and services fell at the fastest pace since April 2022, despite the slowdown in the growth of input costs, indicating continued deflationary pressures and price competition.
The composite purchasing managers' index, which combines manufacturing and services, rose to 52.4 points from 52.1 points in August, confirming an improvement in activity in general.
Lin Song, chief economist for Greater China at ING, said that the K-shaped economic disparity has become clear this year. While resources continue to flow towards artificial intelligence, technological independence and industrial modernization, supporting lagging parts of the economy will remain necessary to achieve more balanced and sustainable growth.
September data reflects an economy regaining some momentum, but its strength remains concentrated in industry and strategic sectors. Continued improvement will depend on the ability of new policies to transfer the recovery to real estate, consumption and investment, and reduce the gap between strong production and weak domestic demand.
The Saudi consumer is rapidly moving to reduce his dependence on cash, with the expansion of the use of digital payments in sectors of daily life, from groceries to entertainment and electronic games, in a shift driven by a young population base, the widespread spread of smartphones, and the development of the payments infrastructure.
Grocery stands out as one of the sectors that has benefited most from this transformation, after digital spending grew by 18 percent over the past year, while spending on electronic games exceeded global averages, an indication of the expansion of the digital economy and changing consumption habits in the Kingdom.
The total value of digital transactions in the Gulf countries is expected to grow at an annual rate of 8.7 percent between 2024 and 2028, reaching $178 billion, according to the Oxford Business Group (OBG), amid an expansion in the use of digital wallets, money transfer applications, and non-cash payment methods.
In this context, Mohamed Nana, Senior Vice President of Digital Partnerships in the Eastern Europe, Middle East and Africa region at MasterCard, said in exclusive statements to Asharq Al-Awsat that this growth is driven by the digital transformation visions adopted by the countries of the region, in addition to the launch of the “Bunna” system for regional Arab payments, which is wholly owned by the Arab Monetary Fund and supported by Arab central banks, and aims to reshape cross-border payments and enhance economic integration regionally and globally.
Nana pointed out that MasterCard has made the “MasterCard Move” wallet available for money transfer solutions via “Bunna,” as part of a cooperation that is the first of its kind between the public and private sectors, noting that the company is focusing in Saudi Arabia on supporting the growth of the digital economy through technology and secure infrastructure for payments and local partnerships.
In the context of the Saudi consumer, Mohammed explained that the adoption of a wider range of digital payment methods is accelerating in Saudi Arabia. In addition to consumers’ knowledge of solutions such as digital wallets, money transfer applications, biometric identification, and installment services, they have become more comfortable using them in their daily lives.
They are also making purchases in more diverse ways, including via voice assistants and social media platforms.
He said that this ongoing shift away from cash is driven by a young, technology-literate demographic, in addition to the widespread use of smartphones, while speed, security, ease, and a smooth payment experience are among the most prominent factors driving the adoption of digital payments.
He stressed that maintaining this momentum requires giving consumers confidence in using new payment methods, through secure technologies and an interconnected digital payments system.
Grocery stands out among the Saudi sectors that have witnessed remarkable growth in the use of digital payments, as the sector recorded an annual growth of 18 percent over the past year, driven by the expansion of digital platforms, price offers, delivery services, and integration with mobile phones.
Nana explained that the fashion and electronics sectors also recorded strong performance, with digital spending on electronic games exceeding global averages, an indication of the strength of the e-sports economy in the Kingdom, which is worth a billion dollars, and its development comes within the national strategy for games and e-sports.
In parallel with the growth in demand for digital payments, MasterCard is working to develop the local infrastructure for processing electronic transactions in Saudi Arabia. Nana said that the company, under the auspices of the Saudi Central Bank (SAMA), launched a technical infrastructure within the Kingdom supported by MasterCard Gateway, which allows e-commerce transactions to be processed locally.
He added that “MasterCard Gateway” has become part of “MasterCard Solutions for Merchants,” which is a payments platform that brings together the company’s services to help companies manage trade operations. He pointed out that last December, “MasterCard” obtained a certificate that allows it to process electronic transactions through the new payments interface for e-commerce affiliated with “SAMA.”
Nana pointed out that artificial intelligence has been an essential part of the MasterCard system for nearly two decades, and helps make every digital experience safer, smarter and more personalized for consumers and companies, and more efficient for customers and partners.
In Saudi Arabia, artificial intelligence represents an essential element in the strategic cooperation with “Riyadh Air” aimed at redefining the travel experience across multiple touchpoints, and an essential axis in the work of the company’s Cyber Resilience Center in Riyadh, to enhance its ability to detect and respond to complex cyber threats and fraud attempts.
Last August, the Saudi Tourism Authority and MasterCard signed a memorandum of understanding to cooperate in supporting the growth of the tourism sector in the Kingdom, and enhancing Saudi Arabia’s position as a global tourist destination, by launching campaigns and initiatives aimed at attracting international visitors from the targeted markets, in a way that supports the Kingdom’s goal of receiving 150 million visitors by 2030.
Nana said that the partnership with the Saudi Tourism Authority uses MasterCard’s data and insights to segment visitor segments, analyze spending, monitor travel trends, measure the impact of events, and predictive analytics, which helps guide marketing strategies and formulate policies.
He added that the company's goal is to design global campaigns and initiatives to attract international travelers from target markets, in integration with the “Priceless” platform, which promotes unique cultural experiences in various parts of the Kingdom.
