China’s manufacturing activity saw significant growth in March, with the Caixin/S&P Global manufacturing PMI rising to 51.1, the highest in 13 months. This expansion was driven by an increase in new orders from both domestic and international customers. The positive results followed strong export and retail sales data, indicating a promising start to the year for the Chinese economy. Official factory data also showed positive signs, with the official PMI rising to 50.8 after six months of contraction, offering relief to policymakers.
Citi recently raised its forecast for China’s 2024 growth to 5.0% from 4.6%, citing recent positive data and policy measures. Premier Li Qiang announced an ambitious economic growth target of around 5% for 2024 at the annual meeting of China’s parliament in March. However, analysts believe that more stimulus measures will be necessary to achieve this target, as the weak statistical base of 2022 that boosted 2023 growth will no longer be a factor.
The PMI survey showed that manufacturers’ output and new orders accelerated in March, with external demand also picking up. Business confidence for the year ahead reached its highest level since April 2023, driven by reduced input costs and the ability to lower prices in a competitive market. However, companies remained cautious about hiring, with the employment sub-index remaining negative since August 2022. Wang Zhe, a senior economist at Caixin Insight Group, highlighted that the economy still faces challenges, including uncertainties, low prices, and insufficient demand.
Despite the positive trends in manufacturing activity, Wang emphasized the need to boost domestic and external demand to support economic growth. The economy continues to face downward pressures, subdued employment levels, and unresolved issues with effective demand. More stimulus measures may be necessary to address these challenges and sustain the momentum of growth seen in the manufacturing sector. Overall, while there are positive signs of recovery and expansion in China’s manufacturing sector, ongoing challenges and uncertainties highlight the need for continued policy support to sustain growth in the broader economy.
