China's manufacturing sector returns to growth for first time

China's PMI rose slightly in March, marking the first growth in manufacturing in six months.

China's official purchasing managers' index (PMI) rose to 50.8 in March from 49.1 in the previous month, data showed on March 31, beating the median forecast of 49.9 in a Reuters poll.

Growth remained modest but was the highest PMI reading since March last year, as tough Covid-19 restrictions began to ease.

The results also provide a positive signal for policymakers even as the real estate crisis remains a drag on the economy and public confidence.

Zhou Maohua, an expert at China Everbright Bank, said the index showed that domestic supply and demand had improved, homeowner and business confidence was recovering, and willingness to consume and invest was rising.

China's new export orders rose to positive levels in March, breaking a more than 11-month slump. However, employment continued to fall, albeit at a slower pace.

Recent upbeat indicators suggest the world’s second-largest economy is getting back on its feet, prompting many analysts to start revising up their growth forecasts for China this year.

For example, Citi Bank on March 28 raised its forecast for China's economic growth in 2024 to 5% from 4.6%, citing "recent positive data and appropriate policy implementation".

Consulting firm China Beige Book said last week that March data showed the Chinese economy was poised for strong growth in the first quarter. The labor market recorded its longest period of improvement since late 2020, while manufacturing and retail sales both grew.

However, the real estate crisis remains a major drag on China’s economy, as the country also faces rising local government debt and weakening global demand.

Earlier, on March 5, Premier Li Qiang announced this year's economic growth target of 5%. However, analysts said policymakers will need to roll out more stimulus measures to achieve the target.

The Chinese government on March 1 approved a plan to boost consumer demand, which is expected to generate more than 5 trillion yuan ($691.6 billion) in market demand per year.

Many analysts fear that China's economy could slip into a Japan-style stagnation by the end of the decade if planners fail to take steps to reorient the economy toward household consumption and market-based resource allocation, and away from its heavy reliance on infrastructure investment.

Duc Minh ( according to Reuters, CNBC )

Source link