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China’s industrial activity expanded for the first time in six months – a positive sign for Beijing as the world’s second-largest economy grapples with a deep slowdown in the real estate sector and weak investor confidence.
The National Bureau of Statistics said on Sunday that the manufacturing purchasing managers’ index was 50.8 points in March, up from 49.1 in February and the highest in a year, supported by rising export orders. A reading above 50 indicates an expansion from the previous month.
But the NBS warned that further state support for the industry is needed, with companies suffering from “insufficient market demand”, underscoring concerns among China’s trading partners that excess industrial capacity could spill over into export markets .
“In March, as companies accelerated the resumption of work and production after the Spring Festival, market activity increased,” Zhao Qinghe, senior statistician at the National Bureau of Statistics, said in a note, referring to the Lunar New Year holiday week in February. .
China’s economy has shown signs of stabilization in recent weeks after mixed signals last year, when Beijing said gross domestic product grew 5.2% despite weak export earnings and property sales.
The Communist Party set a 5% growth target for 2024, the same as last year, at this month’s meeting of China’s parliament. Analysts said the goal was ambitious and would require more stimulus support.
But industrial profits in the January-February period hit a 25-month high, according to data released Wednesday. According to economists, this indicates that the industrial sector is hitting bottom.
Citi said this week it is revising its full-year estimate of GDP growth in 2024 to 5% from 4.6%, citing recent data and firmer policy responses from the government.
In addition to stronger industrial profits, the bank said exports beat expectations, services activity was robust during the Lunar New Year holiday and capital spending and infrastructure investment were robust.
The nonmanufacturing PMI, which includes services and construction, stood at 53 in March, up from 51.4 in February and the highest since the middle of last year.
The signs of stabilization come after Chinese President Xi Jinping sought to send a strong signal to foreign investors by meeting with U.S. CEOs in Beijing on Wednesday.
In its PMI release on Sunday, the NBS said the indices for new export orders and imports were 51.3 and 50.4 respectively, an increase of five and four points from the previous month.
The bureau said the increase was driven by exports of chemical fibers, rubber and plastic products, as well as automobiles and computer and communications equipment.
The NBS said the PMI results reflect “intense industrial competition and a high proportion of businesses with insufficient market demand”.
He said policies to boost domestic consumption through large-scale equipment upgrades and trade in consumer goods “need to be further detailed and implemented” to provide strong support to manufacturers.
In a research note this week, ING said a continued recovery in the manufacturing sector would contribute to Beijing’s goal of meeting its 2024 growth target, “but more supportive policies are still needed to sustain the momentum and recovery.”