China’s manufacturing activity expanded at its fastest pace in more than a year in March, boosting expectations that Asia’s largest economy is on the road to recovery.
The seasonally adjusted Caixin Purchasing Managers’ Index rose to 51.1 in March from 50.9 in February, marking the fifth consecutive month of expansion and the fastest pace of recovery since February 2023. An index above 50 indicates expansion.
The survey was released a day after the National Bureau of Statistics’ official purchasing managers’ index rose to 50.8 in March, the first time in six months that it has been above the 50 mark and better than expected.
A sign that the economy is on the road to recovery
Wang Zhe, senior economist at Caixin Insight Group, said the improvement in the Caixin PMI was “driven by more new business inflows, including from overseas”, which encouraged Chinese manufacturers to boost output.
The stronger indicators are leading analysts to believe that China’s economy is recovering as policymakers grapple with a deep slump in the property sector.
“The strong March PMI data reinforces expectations of a GDP upgrade,” Citi analysts said in a research note published on Sunday. “The better-than-expected and broad-based recovery in sentiment in manufacturing and [other] sectors confirms that the broader economy is still on the road to recovery.”
Goldman Sachs also noted that activity in both the services and construction sectors accelerated in March.
The need to boost demand
But despite the positive signs, Caixin Insight Group’s Wang stressed that many dangers remain.
“Downward economic pressure remains, employment is still low, prices are still low and insufficient effective demand has not been fundamentally resolved, underscoring the need to further boost domestic and external demand,” Wang said.
China’s benchmark Shanghai Composite Index rose more than 1 per cent in morning trading on Monday.
