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China March Factory Activity Unexpectedly Expands

The sector expanded for the first time in 9 months against predictions

The the headquarters of the People's Bank of China, the country's central bank., Photo: Reuters/Kim Kyung-Hoon.
By Reuters Whatsapp Twitter Facebook Share
2 years ago

SHANGHAI – Activity in China‘s manufacturing activity unexpectedly expanded in March for the first time in nine months, an official survey showed on Friday, adding to hopes that downward pressure on the world’s second-largest economy is easing.

The official Purchasing Managers’ Index (PMI) rose to 50.2 in March, up from the previous month’s 49 but still only marginally above the 50-point mark that separates growth from contraction on a monthly basis.

Analysts polled by Reuters had predicted 49.3.

The February reading was the weakest since 2011. However some economists said the timing of the long Lunar New Year holiday that month might have distorted that figure.

China is the world's second largest economy and has been affected by downward trends. Photo: REUTERS/Kim Kyung-Hoon

China is the world’s second largest economy and has been affected by downward trends. Photo: REUTERS/Kim Kyung-Hoon.

Hopes that the long-suffering manufacturing sector may be bottoming out were fuelled by recent industrial profit data which showed combined earnings rose 4.8 percent in the first two months of the year from the same period in 2015, ending seven straight months of decline.

Some analysts said that improvement may be linked in part to a growing property market recovery and resulting increase in construction activity, boosting demand for building materials from cement to glass and steel.

Cash-starved Chinese mills have also been exporting large amounts of steel products to maintain cash flow, sparking accusations of dumping from some of its top trading partners.

In addition, global energy and commodity prices have staged a limited recovery in recent weeks, which may have bolstered flagging profits at oil and mining firms and reduced strains on their balance sheets.

China‘s real estate investment rose 3 percent in the first two months of 2016 in year-on-year terms, quickening from an increase of just 1 percent in all of 2015, though a huge overhang of unsold homes could keep further market gains in check.

Some analysts say business confidence also may have improved as fears of a sharp depreciation in the yuan currency have eased.

Adding to the upbeat mood, growth in China‘s services sector expanded strongly.

The official non-manufacturing Purchasing Managers’ Index (PMI) rose to 53.8 in March, up from the previous month’s 52.7 and well above the 50-point mark that separates growth from contraction on a monthly basis.

With manufacturing in a prolonged slump, services have been a crucial source of growth and jobs for China over the past year, and analysts have been watching closely to see if the sector can maintain momentum in 2016.

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