China’s March factory activity expands for first time in six months By Reuters

SHENZHEN, China (Reuters) – Manufacturing activity in China grew for the first time in six months in March, an industrial survey showed on Sunday, giving relief to policymakers even as economic problems continued to drag on the economy and confidence.

The official Purchasing managers’ index (PMI) rose to 50.8 in March from 49.1 in February, above the 50-mark separating growth from contraction and beating the median forecast of 49.9 in a Reuters poll.

Recent signs show that the world’s second-largest economy is slowly recovering, prompting analysts to raise their growth forecasts for the year. Policymakers have been grappling with economic disruptions since China was left with stricter COVID measures at the end of 2022.

“March figures show that the economy is close to ending Q1,” China Beige Book, an advisory firm, said in a note last week. “Hiring showed the slowest improvement since late 2020. Manufacturing rebounded, as did sales.”

However, the sharp decline in Asia’s largest financial sector remains a major challenge to growth, testing the health of heavily indebted local governments and the liquidity of state-owned banks.

The official non-manufacturing PMI, which includes services and construction, rose to 53 from 51.4 in February, marking the highest reading since September.

Premier Li Qiang announced a 2024 economic growth target of around 5% earlier this month at the annual meeting of the National People’s Congress, China’s parliament.

But experts say policymakers will need to release more stimulus to meet that goal because they cannot account for the low 2022 numbers that fueled 2023 growth.

Citi on Thursday raised its forecast for China’s economic growth this year to 5.0% from 4.6%, citing “recent positive data and policy delivery”.

China’s cabinet on March 1 approved a plan aimed at encouraging the upgrading of major equipment and the sale of consumer goods. The head of the country’s planners told a press conference earlier this month that the plan could create a market worth more than 5 trillion yuan ($691.63 billion) a year.

Many analysts worry that China may begin to flirt with Japan’s social instability in the next decade unless policymakers take steps to restructure the economy in terms of household consumption and distribution, and move away from the heavy reliance on businesses seen in the past.

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