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A worker is seen at the Zhonghong Packaging Company in the Lianyun district of Lianyungang city, located in East China’s Jiangsu province, on March 27, 2025.
China’s manufacturing sector has reported notable growth in March, expanding at the most rapid rate in a year, which highlights the effectiveness of Beijing’s stimulus initiatives aimed at supporting economic recovery amidst concerns over impending U.S. tariffs.
According to data from the National Bureau of Statistics released on Monday, the official purchasing managers’ index (PMI) for March was recorded at 50.5. This marks the most significant expansion since March of the previous year and aligns with projections put forth in a Reuters poll.
The PMI had risen above the neutral mark of 50—indicating expansion—during February when it reached 50.2, recovering from a contraction of 49.1 in January as manufacturing resumed operations following the Lunar New Year holiday.
The sub-index for production in March rose to 52.6, indicating strengthening activity, while new orders increased to 51.8, suggesting an upward trend in manufacturing demand and supply.
However, the employment sub-index fell to 48.2, indicating challenges in job creation within the sector.
Julian Evans-Pritchard, head of China economics at Capital Economics, noted that the PMI figures indicate a resurgence in infrastructure spending and resilience in exports despite the looming U.S. tariffs. Nevertheless, he emphasized that overall economic growth is expected to decelerate in the first quarter, compared to the previous quarter, largely due to weaknesses in the services sector and unfavorable base effects.
The survey also reported that the PMI for non-manufacturing sectors—including services and construction—rose to 50.8, representing the highest level in three months. Yet, the employment subsector within non-manufacturing dropped to 45.8, indicating job losses in both services and construction, which points to a softened labor market across various sectors.
The benchmark CSI 300 index on the Chinese mainland saw a slight decline of 0.12%, while the offshore yuan appreciated by 0.16%, trading at 7.2570 against the U.S. dollar.
Escalating Trade Tensions
Chinese authorities have committed to intensifying their monetary and fiscal stimulus efforts to reach a growth target of around 5% for the year, particularly in light of increasing trade tensions with the U.S.
The measures taken thus far include multiple rounds of expanding a consumer goods trade-in initiative aimed at boosting domestic consumption and the accelerated issuance of government debt to alleviate housing issues and combat deflation.
The government has increased its budget deficit to approximately 4% of GDP for 2025, up from the previous 3%, indicating a rare elevation as policymakers work to mitigate the effects of tariffs.
Evans-Pritchard remarked that the budget provides scope for further fiscal support in the coming months. However, he cautioned that U.S. tariffs, which are expected to escalate soon, could soon start impacting exports significantly.
The latest PMI readings come amidst a complex landscape of economic indicators, with industrial output and fixed asset investments showing unexpected growth, while consumer inflation dipped into negative numbers for the first time in a year.
Exports, which had been a relatively strong aspect of the struggling economy, have begun to slow down in the initial months of the year, reporting their slowest growth rate since April of the previous year due to exporters scaling back operations as they adjusted to the new tariff landscape.
In a recent move, U.S. President Donald Trump imposed an additional 20% tariff on Chinese goods, citing concerns over China’s involvement in the illicit fentanyl trade, prompting retaliatory tariffs of up to 15% on select U.S. products from Beijing, particularly affecting energy and agricultural sectors.
Trump plans to introduce “reciprocal” tariffs targeting trade imbalances on April 2, which could impose additional duties on Chinese goods.
Furthermore, the U.S. president hinted that there might be potential tariff reductions on China if an agreement can be reached regarding the sale of TikTok’s Chinese parent company, ByteDance, to an American firm.
The anticipated Caixin/S&P Global manufacturing PMI for March, set to be released on Tuesday, is expected to indicate a rise in manufacturing activity to 51.1 from the previous month’s 50.8.
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