By Joe Cash
BEIJING (Reuters) -China’s manufacturing activity expanded at the fastest pace in three months in February as new orders and higher purchase volumes led to a solid rise in production, an official factory survey showed on Saturday.
The reading should reassure officials that fresh stimulus measures launched late last year are helping shore up a patchy recovery in the world’s second-largest economy, ahead of China holding its annual parliamentary meeting starting on March 5.
Whether the upturn can be sustained remains to be seen amid a trade war that was kicked off by U.S. President Donald Trump’s first salvo of punitive tariffs.
The official purchasing managers’ index (PMI) rose to 50.2 in February from 49.1 a month prior, the highest since November and beating analysts’ forecasts in a Reuters poll of 49.9.
The non-manufacturing PMI, which includes services and construction, rose to 50.4 from 50.2 in January.
Chinese policymakers are expected to announce economic targets and fresh policy support next week at the high-profile gathering in Beijing, which investors will also watch for signs of further support for the struggling property sector and indebted local developers.
China’s $18 trillion economy hit the government’s growth target of “around 5%” in 2024, though in an uneven manner, with exports and industrial output far outpacing retail sales while unemployment remained stubbornly high.
Beijing is expected to maintain the same growth target this year, but analysts are uncertain over how quickly policymakers can revive sluggish demand, especially given the intensifying trade tensions with the U.S.
“Since the PMI data is measured on a month-on-month basis, it may be affected by seasonal factors related to the Spring Festival in January and February,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.
“The manufacturing data is relatively stable,” he added, with the caveat that a more accurate assessment would only be possible after the release of further data. China will release trade data for January-February on March 7.
New export orders, factory gate prices, employment all remained in negative territory last month, the National Bureau of Statistics data showed, but contracted more slowly.
Employment still hit a 22-month high.
TACKLING EXTERNAL SHOCKS
To sustain growth and counter rising external pressures, policymakers have pledged higher fiscal spending, increased debt issuance and further monetary easing.
Top Chinese Communist Party officials met on Friday and vowed to take steps to prevent and resolve any external shocks to China’s economy, state media reported.
The Politburo meeting came a day after Trump said he would slap an extra 10% duty on Chinese goods on March 4, on top of the 10% tariff that he levied on February 4 over the fentanyl opioid crisis, to push Beijing to do more to stop the trafficking of the deadly drug.
That would result in a cumulative 20% tariff, which is still lower than the 60% he threatened on the campaign trail.
China’s commerce ministry said on Friday it hoped to return to negotiations with the United States as soon as possible, warning that failure to do so could trigger retaliation.
Analysts polled by Reuters estimated the private sector Caixin PMI rose 50.3, from 50.1 in January. The data will be released on March 3.
(Reporting by Joe Cash; Editing by Muralikumar Anantharaman)
