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China's manufacturing activity rebounds to nine-month high
2016/04/01

China's manufacturing activity rebounded in March to its highest level since last August, thanks to the government's continued structural reforms, official data showed on Friday.

The purchasing managers' index (PMI) came in at 50.2 in March, up from February's 49, according to the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing.

A reading above 50 indicates expansion, while a reading below 50 reflects contraction.

NBS statistician Zhao Qinghe attributed the rebound to the government's pro-growth measures, as well as the rising demand in manufacturing imports and exports.

A price rebound for major international commodities spurred purchases. Technology upgrades also contributed to improvement in manufacturing sectors, said Zhao.

The sub-index measuring production stood at 52.3, up 2.1 points from a month earlier, with that for new orders settling at 51.4, up 2.8 points.

The sub-index for imports came in at 50.1, up 4.3 points from February, the highest reading since December 2013.

A separate survey by financial information service provider Markit, sponsored by financial media company Caixin, also showed improvement in Chinese manufacturers' operating conditions.

The Caixin General China Manufacturing Purchasing Managers' Index (PMI), an indicator of manufacturing activity, rose to 49.7 in March from 48 in February.

"All categories of the index showed improvement over the previous month," said Caixin chief economist He Fan.

The output and new order categories rose above the neutral 50-point mark, indicating that "the stimulus policies the government has implemented have begun to take hold," he said.

To help the country's manufacturing sector weather the downturn, the Chinese government has cut interest rates, reduced taxes, slashed overcapacity and initiated reforms to improve efficiency.

In particular, the warming of the property sector has led to signs of recovery of the manufacturing sector, according a HSBC report.

China's real estate investment rose 3 percent in the first two months of 2016 year on year, up from an increase of just 1 percent in all of 2015, official data showed.

Continued strong sales and more efforts to destock in third- and fourth-tier cities have boosted demand for related industries in both the manufacturing and services sectors, said HSBC.

However, it is still too early to conclude that a recovery has firmly taken hold in the domestic economy, said the HSBC report.

The NBS data showed that the employment sub-index was 48.1, indicating employment at manufacturing enterprises continued to decrease.

Additionally, the PMI for small and medium companies stood at 48.1 and 49.1, respectively, according to the NBS, showing their manufacturing activities had contracted.

"Considering that current conditions remain uncertain, the government needs to continue with moderate stimulus measures to reinforce market confidence," said He Fan.

Further monetary and fiscal policy expansion can help stabilize property investment and support urbanization-related infrastructure spending, said the HSBC report.

"We believe that, combined with more actions to cut overcapacity, this represents the most appropriate strategy to anchor growth and counter deflation," said the report.

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