According to Chen Yawen and Ryan Woo
Beijing (Reuters) – Factory activity in China rose unexpectedly for the first time in four months in March, an official survey showed on Sunday, suggesting the government stimulus measures may begin to master.
If supported, the improvement of the business environment has to offer powerless manufacturing sector is on the road to recovery, easing fears that China may slip into a sharp economic downturn.
But many analysts remain cautious on the growth outlook, citing seasonal distortions caused by prolonged Lunar New Year break in February. They argue that the real investment and consumer demand remains soft and pushed up stocks at a sharp rate, potentially pressure on the sector.
The official Purchasing Managers' Index (PMI) rose to 50.5 in March from a three-year low of 49.2 in February, marking the first expansion in four months, according to data released by the National Bureau of Statistics (NBS) on Sunday. 50 separates a sign of growth reduction on a monthly basis.
Analysts polled by Reuters The, expected gauge production will pick up a little bit 49.5, as factories increased production after the holidays, the Lunar New Year and rebuilt inventories before the seasonal pick-up of activity in the spring.
factory output grew at its fastest pace in six months in March, reversing a short cut in the previous month. He rose to 52.7 from February's 49.5, the highest level seen since September 2018.
Total new orders also grew at a fast pace, raising prices, the factory gates at five-month high of 51.4 in, ending four months of contraction.
"The jump is likely to give a big boost to the stock markets and may delay the reduction in deposit reserve ratio (RRR)," said Ting Lu, chief China economist at Nomura.
China announced five RRR cuts in the past year to make more money for the banks to increase lending to private firms, as well as a further decline is widely expected.
Ting said that there are limited opportunities for manufacturing PMI to rise further and the chance for another failure, "not enough."
"In general, even though manufacturing PMI in March is slightly soften the pessimistic expectations of the economy, we believe that the actual situation may not be so optimistic, as reflected in this index," said Lianxun Securities in a note.
Export orders declined for the 10th consecutive month, indicating that external demand remained sluggish and further policy cushions may be necessary if trade tensions. China trade-oriented neighbors Japan, South Korea and Taiwan saw more signs of slowing demand in China and other countries.
"Construction work, starting from the beginning of the year led to a strong domestic demand but external demand remains weak and the outlook for the import and export is still not optimistic," the economists said Huatai Securities.
Tit for tat tariffs imposed by Washington and Beijing remain in place as the negotiations continue until the end of a trade war, which disrupted the flow of billions of dollars of trade turnover between the two largest economies in the world. It is not clear when a deal acceptable to both sides can be done.
President Donald Trump said on Friday that talks with China were very good, but added that he would be nothing less than "a big deal" after the main trade officials wrapped up two days of discussions in Beijing takes.
Deputy Prime Minister & # 39; er China Liu He will go to Washington on April 3 for the further negotiations.
Chinese factories have shed more staff in March, a working subindex edged up to 47.6 from 47.5 in February.
Against the background of rising labor costs and weak sales, a growing number of foreign companies from car manufacturers electronics manufacturers decided to close factories in China in recent months, raising the specter of more layoffs. The unemployment rate rose to 5.3 percent in February, approaching a maximum of two years.
Sony Corp (T 🙂 is closing its factory in Beijing smartphone and production stops at the end of the month, while Samsung Electronics (KS 🙂 ceased operations in one of their mobile phone manufacturing plants in China last year.
PMI study showed small and medium-sized manufacturers still lived worse than large companies, many state-controlled, although their activity is improved compared with the previous month, suggesting that the efforts of politicians to direct available funding of the private sector gradually work.
Politicians have recognized that the economy is under pressure. Perennial companies to curb debt risks and pollution contain new investments, while the US trade war, China is hurting China's export sector, threatening even more jobs.
In response, Beijing plans more spending on roads, railways and ports, as well as nearly 2 trillion yuan (297.27 billion dollars) in tax cuts to ease the pressure on corporate balance sheets.
Measures take time to die, according to analysts who say economic activity can not be stabilized by mid-year. Data on Wednesday showed industrial revenues fell by 14 percent, a sharp drop from at least the end of 2011.
Growth in China's service – more than half of the economy – picked up in March as new orders rose more quickly. official non-manufacturing purchasing managers' index (PMI) rose to 54.8 from 54.3.
Construction activity swung back into high gear in March, with the return of warm out & # 39; I. Sub-read for construction works amounted to 61.7 in March, up from 59.2 in February.
(This story was refiled to fix typo in paragraph 3)