China’s manufacturing activity reached a one-year high in March, with the PMI rising to 50.5, driven by strong orders. However, GDP growth faces challenges amid service sector weaknesses and US tariffs. The government’s ongoing fiscal stimulus measures aim to bolster the economy as uncertainties persist.

In March, China’s manufacturing activity expanded significantly, reaching the fastest pace in a year, according to a recent factory survey. The surge in new orders has allowed production to grow, providing a necessary boost for the economy as it navigates ongoing challenges related to the escalating United States trade war.

The official purchasing managers’ index (PMI) rose to 50.5, up from 50.2 the previous month—marking the highest reading since March 2024 and aligning with analysts’ forecasts. The non-manufacturing PMI, encompassing services and construction, also improved to 50.8 from 50.4.

Economic experts, such as Julian Evans-Pritchard from Capital Economics, suggest that this indicates an uptick in infrastructure spending, while exports have shown resilience against US tariffs. Nevertheless, the data also points to a slower GDP growth amid ongoing weaknesses in the service sector.

Despite increasing tariff threats from US President Donald Trump, who has already imposed a 20 percent tariff on all Chinese imports, China has maintained its economic target at “around 5 percent” for the year. This resolution persists even as the government emphasizes fiscal stimulus, debt issuance, and monetary easing to mitigate the impacts of the trade war.

As 2023 began, China’s economy experienced volatility, with retail sales modestly improving while contending with deflation and rising unemployment. In response to foreign concerns, President Xi Jinping engaged with multinational CEOs to emphasize the importance of robust global supply chains.

Furthermore, Premier Li Qiang has called for greater market openness from countries to counteract global uncertainties. China is also enhancing its “cash for clunkers” program to stimulate consumer spending. Analysts forecast the private sector Caixin PMI to rise to 51.1, with results due on April 1, 2023.

In summary, China’s manufacturing sector has shown signs of recovery despite external trade pressures, with recent PMI readings reflecting positive trends in production and orders. The government’s commitment to fiscal support and market openness aims to stabilize the economy amid uncertainties, while efforts to boost domestic consumer spending continue. Observations in the service sector indicate ongoing challenges that need to be addressed for a comprehensive recovery.

Original Source: www.business-standard.com

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