China factory activity up after four-month slide, Latest Business News - The New Paper

China factory activity up after four-month slide

This article is more than 12 months old

But exports remain on downward trend as trade war with US continues

BEIJING China's manufacturing sector ended its four-month downward trend in March, official data showed yesterday, but exports continued their long slide in the wake of the Washington-Beijing trade war.

The official Purchasing Managers' Index, a measure of factory activity, rose to 50.5 in March from the previous month's contraction and three-year low of 49.2, reported AFP.

The growth was likely driven by seasonal factors as factories ramped up production after the Chinese New Year holidays in February.

Some steel mills and coal power plants also increased output with winter smog restrictions ending.

Factory output grew at its fastest pace in six months in March, China's National Bureau of Statistics reported, but export orders shrank for the 10th straight month amid slowing global growth and as collateral damage in the trade spat with the US.

Over the last eight months, Washington and Beijing have slapped tariffs on more than US$360 billion (S$492b) in two-way goods trade, weighing on the manufacturing sectors in both countries.

US and Chinese negotiators wrapped up trade talks in Beijing on Friday ahead of another round next week, when China's economic tsar Liu He will head for Washington to continue discussions on a possible deal.

China has announced a raft of stimulus measures to cushion the impact from its cooling economy.

Earlier this month, Premier Li Keqiang announced more spending on roads, railways and other big-ticket infrastructure projects, along with tax cuts worth 2 trillion yuan(S$407 billion) to ease pressure on companies and spur employment.

China announced a lower growth target of 6.0 to 6.5 per cent this year, down from 6.6 per cent last year.

There is evidence for caution, reported Bloomberg.

Despite a pickup from the lowest level in a decade in February, new export orders are still contracting.

The March data have overstated the increase , as the February Chinese New Year break weighed down the data economist Zhou Hao at Commerzbank in Singapore told Bloomberg.

If today's data on South Korean March exports confirm a pickup, the market will be further convinced that China's economy is turning around, Mr Zhou said.

That will marginally lift concerns about a downturn in China, and lower expectations in the short term for a reduction in the amount of money banks must keep in reserve, he said.