By Leika Kihara

TOKYO, Reuters – Activity in most Asian factories slowed in March due to a slumping Chinese market and higher raw material prices attributed to the Ukraine crisis. This added pressure on firms already struggling with lingering supply chains disruptions.

Japan saw a decrease in COVID-19, however the rising fuel and grain cost outlook was not good for other Asian economies that depend on imported energy.

China’s factory activity plunged in March at the fastest pace for two years, according to a PMI (private sector purchasing managers’ index) on Friday. The fallout of the Ukraine crisis, and the resurgence of domestic coronavirus infections, hit domestic and external demand.

This result was consistent with Thursday’s official data that showed activity in Chinese manufacturing, services and construction simultaneously contracting in March. It is the first such contraction since 2020’s COVID-19 epidemic.

Analysts say that the slowdown in China is a bad sign for Asia. Asia hosts large manufacturers dependent upon consumption in China’s second largest economy.

South Korea experienced a decrease in manufacturing activity during March. The sharpest decline in export orders since July 2020 was the result of a steep rise in input costs for commodities such as oil, metals, or semiconductors.

Other PMIs on Friday also showed that factory activity in Taiwan, Vietnam and Malaysia slowed, while Malaysia contracted, as Malaysia felt the effects of rising raw materials prices.

Tai Hui of J.P. Morgan Asset Management, said that commodity prices will continue to be the main source for transmission.

He said, “What’s going on is that manufacturers, particularly the downstream ones, will face some more cost pressure.”

Japan’s manufacturing activity, on the other hand, grew faster than March before, due to domestic demand being buoyed by the decreasing impact of the pandemic.

Japan’s export orders plummeted due to a lack of external demand and the effects of Russia’s war on Ukraine, which caused supply chain disruptions and pandemics in China.

South Korea’s PMI declined to 51.2 in March, from 53.8 February. It is above the threshold at 50 which indicates an expansion of activity but below the low point in the last four months.

Japan’s March au Jibun Bank PMI was 54.1, an increase from the 52.7 recorded in February.