China’s factory activity expands at fastest pace in 13 months in March

China’s manufacturing activity expanded at the fastest pace in 13 months in March, with business confidence hitting an 11-month high, driven by growing new orders from customers at home and abroad, a private survey showed on Monday.

Citi last week raised its forecast for China’s 2024 growth to 5 per cent from 4.6 per cent, citing “recent positive data and policy delivery”.

But analysts said policymakers would need to roll out more stimulus to hit that target as they will not be able to count on the weak statistical base of 2022 which flattered 2023 growth data. Moreover, a deep slump in the property sector remains a major drag on activity.

Expansion in manufacturers’ output and new orders accelerated last month, the PMI survey showed. External demand also picked up, pushing the gauge for new export orders to its highest level since February 2023.

Businesses’ confidence towards the year ahead rose to its highest point since April 2023 on good news such as a reduction in input costs.

“A drop in raw material prices reduced production costs for manufacturers, providing leeway for them to lower prices amid fierce market competition,” said Wang Zhe, senior economist at Caixin Insight Group.

However, companies were cautious about adding employees, and the relevant subindex has remained negative since August.

“The economy still faces headwinds with prevalent uncertainties and unfavourable factors,” added Wang.

“Downward economic pressures persist, employment remains subdued, prices remain low, and insufficient effective demand has not been fundamentally resolved, underscoring the need to further boost domestic and external demand.”