China factory activity growth falters on weaker demand in March

BEIJING – China’s factory activity growth stalled in March, weighed by slowing production and weaker global demand and adding to uncertainty about a post-Covid-19 recovery, a private sector survey showed on Monday.

The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) fell to 50 in March. This followed February’s reading of 51.6, which indicated the first monthly expansion in seven months.

The reading missed expectations of 51.7 in a Reuters poll, and echoed slower growth in an official PMI released on Friday. The 50-point index mark separates growth from contraction on a monthly basis.

The world’s second-largest economy

showed gradual recovery in the first two months of the year

with a strong pickup in the services sector, boosted by the lifting of years of strict Covid-19 containment measures.

However,

a property downturn

, weaker global demand and financial uncertainty raised doubts about the strength of momentum.

“The foundation for economic recovery is not yet solid... economic growth will still rely on a boost in domestic demand, especially an improvement in household consumption,” said Mr Wang Zhe, senior economist at Caixin Insight Group.

“Only by working hard to stabilise employment, increase household income and improve market expectations can the government reach its goal of restoring and expanding consumption.”

Beijing has set

a modest target for economic growth this year of around 5 per cent.

The economy grew by just 3 per cent last year, one of the weakest showings in nearly half a century.

Factory activity was hit by slower growth in production and demand in March, with both sub-indexes falling from the previous month.

The new export orders sub-index fell to 49 after briefly swinging into growth in February, suggesting that global demand remained weak.

To prop up growth, Chinese Premier Li Qiang last week vowed to support consumption and investment. The central bank also lowered its reserve requirement ratio last month.

Chinese top officials in recent days have softened their stance towards the private sector, which cheered markets.

“The new economic team is officially taking over; we will likely see more pro-business policies going forward, even though our expectation for stimulus is low,” said Citi in a research note. REUTERS