China’s factory activity witnessed significant growth in March, reaching its highest level in four months, fueled by increased demand and strong export orders, according to a private-sector survey. The Caixin/S&P Global manufacturing Purchasing Managers’ Index (PMI) rose to 51.2 in March from 50.8 in February, surpassing analysts’ expectations of 51.1. A reading above 50 indicates expansion, while anything below signifies contraction. This positive development aligns with an official PMI report released recently, which also indicated that manufacturing growth hit its fastest pace in a year.
The improvement in March was largely driven by a notable increase in new orders, particularly export orders, which experienced their most substantial growth in 11 months. Analysts suggest that this surge can be attributed to U.S. importers stockpiling Chinese goods in anticipation of forthcoming tariff hikes. Additionally, there were signs of improvement in the job market, as manufacturers added jobs for the first time since August 2023. However, challenges persist amid an ongoing trade war with the United States.
Tariffs imposed by U.S. President Donald Trump have totaled 20% on Chinese imports since January, with expectations of more tariffs to come. Economists express doubts about the sustainability of this growth, emphasizing that while fiscal support measures are possible in the coming months, escalating tariffs are likely to negatively impact exports soon. Despite a drop in input costs for the first time in six months, allowing factories to lower output prices for the fourth consecutive month, manufacturer confidence has slightly declined compared to February. As the external economic landscape grows increasingly complex, experts urge for China to adopt more proactive and decisive macroeconomic policies to foster sustained recovery efforts in the coming years.