China manufacturing activity hits 12-month high ahead of escalating tariffs

BEIJING - China’s manufacturing activity expanded at the fastest pace in a year in March, a factory survey showed on March 31, with new orders boosting production, giving it some reprieve as it deals with an intensifying US trade war.

The reading should reassure officials that recent fiscal support is bolstering the world’s No. 2 economy, which is also benefiting from foreign buyers front loading purchases in anticipation of further US trade curbs.

However, that relief is expected to be short-lived with US President Donald Trump

set to announce new “reciprocal” tariffs on April 2

to tackle perceived trade imbalances, potentially adding more levies on Chinese goods.

Mr Trump has already

imposed a cumulative 20 per cent tariff on all Chinese imports

since returning to the White House in January, accusing Beijing of not doing enough to curb the flow of chemicals used to make the deadly drug fentanyl into the US.

The official purchasing managers’ index (PMI) rose to 50.5 in March from 50.2 a month prior, according to the National Bureau of Statistics, the highest reading since March 2024 and matching analysts’ forecasts in a Reuters poll.

The non-manufacturing PMI, which includes services and construction, accelerated to 50.8 from 50.4.

“The official PMIs suggest that infrastructure spending is ramping up again and that exports have so far remained resilient in the face of US tariffs,” said Mr Julian Evans-Pritchard, head of China economics at Capital Economics.

“But the surveys are still consistent with slower GDP growth in Q1 amid weakness in the service sector,” he added.

China has kept its economic target for this year unchanged at “around 5 per cent” despite Mr Trump’s tariff threats, which could call time on a largely export-led recovery under way since the end of the Covid-19 pandemic in late 2022.

The government has pledged more fiscal stimulus, increased debt issuance, further monetary easing and put even greater emphasis on boosting domestic demand to cushion the impact of the trade war.

Pointing to improved domestic demand, the new orders sub-index rose to 51.8 in March, its highest reading in 12 months, while the decline in new export orders slowed, narrowly missing the 50-point mark separating growth from contraction.

“It’s good, but not good enough,” said Economist Intelligence Unit senior economist Xu Tianchen. “I’m pretty worried about the output prices, which fell despite the increase in new orders.”

“It’s somewhat softer than our expectations, with the property sector continuing to act as a drag,” he added.

China’s economy has had a bumpy start in 2025, with nascent improvement in retail sales offset by persistent deflationary pressures and rising unemployment.

Trying to assuage concerns among foreign enterprises over China’s economy amid Mr Trump’s tariff threats, Chinese President Xi Jinping gathered a group of multinational chief executives last week and

urged them to protect global industry and supply chains.

Analysts polled by Reuters forecast the private-sector Caixin PMI to have risen to 51.1. The data will be released on April 1.

But economists do not expect such conditions will last.

“We doubt the rest of the year will be much better,” said Mr Evans-Pritchard of Capital Economics.

“The budget does allow for fiscal support to be stepped up further over the coming months. But US tariffs, which look set to escalate this week, will start to weigh on exports before long.” REUTERS