Manufacturing Activity Strengthens in March: Govt

China’s manufacturing activity strengthened in March after a seasonal drop the pre-vious month, with both import and export demand rebounding despite increasing trade tensions with the United States, according to an indicator released on Saturday.

The official manufacturing purchasing managers index (PMI) rose for the first time in four months to 51.5 in March, up from 50.3 last month, according to figures from the National Bureau of Statistics (NBS). A number above 50 indicates that activity expanded, while anything below that means a contraction in manufacturing activity.

The non-manufacturing PMI, which covers the services and construction industries, stood at 54.6 in March, also up from a reading of 54.4 in February, the NBS said.

An NBS analyst attributed the accelerating expansion in both manufacturing and services activity to a seasonal pick-up, following the weeklong Lunar New Year holiday in February. The sub-indexes showed manufacturing activity in output, new orders, new export orders and imports all improved.

New export orders posted a reading of 51.3, up from 49 in February, while new im-port orders also rose to 51.3, up from 49.8 a month ago, as both readings crossed back into expansion territory for the month.

“With manufacturers going back into production after the Lunar New Year, opera-tional activities and manufacturing expansion accelerated,” wrote NBS analyst Zhao Qinghe. “The sub index for new orders posted a higher reading than the index of output for two months, indicating stronger internal momentum for manufacturing growth.”

Expansion slowed for the retailing and lodging sectors in March, as the distorting ef-fect of the Chinese New Year holiday was eliminated. The sub-indexes for business activ-ities in transportation, dining and accommodation all weakened for the month.

Export and import demand in March shrugged off increasing trade tensions between the U.S. and China, after U.S. president Donald Trump announced new punitive tariffs on up to $60 billion in Chinese imports for unfair trade practices last week.

“Exporters would speed up their shipments in order to avoid high tariffs on some products,” said Raymond Yeung, an economist at Australia & New Zealand Banking Group. “The PMI will bode well for the GDP in the first quarter, which will be higher than the official target of 6.5%.”

But some observers were less optimistic on the future due to the growing frictions. Deng Haiqing, an analyst with JZ Securities, said those frictions are applying downward pressure on China’s economy.

“If you observe an average reading of the quarterly PMI, you would find the 2018 readings have dropped slightly from the first quarter of 2017,” Deng said. “There are mixed factors that could impact China’s economy in 2018. Prospects for the economy are very unclear, especially due to growing trade frictions between the U.S. and China.”

The independent Caixin manufacturing PMI will be published on Monday and the Caixin China General Services Business Activity Index will be released on April 4.

Contact reporter Leng Cheng (chengleng@caixin.com)