China's factory activity picks on strong supply, demand; PMI rises to 50.8

China's factory activity grew at a faster pace in February, driven by stronger supply and demand, including a rebound in export orders, a private-sector survey showed on Monday, partly due to seasonal factors related to the holiday period. 

The Caixin/S&P Global manufacturing PMI rose to 50.8 in February from 50.1 the previous month, marking a three-month high and beating analysts' forecasts in a Reuters poll of 50.3. 

The 50-mark separates growth from contraction. 

The PMI offers a snapshot of operating conditions in the manufacturing sector. 

The positive trend in the Caixin survey aligned with an official PMI released over the weekend that showed manufacturing activity expanding at the fastest pace in three months. 

"The holiday period saw robust consumption momentum, and technological innovations in certain industries added to the positive sentiment, helping sustain the manufacturing market recovery," said Wang Zhe, economist at Caixin Insight Group. 

Factory production accelerated in February from the previous month, while total new orders increased at the quickest pace in three months. New export orders increased at their fastest pace since April last year. 

However, manufacturers faced rising input costs, particularly for materials like copper and various chemicals, putting pressure on profit margins. 

To mitigate these challenges, factory owners focused on cost-cutting. Employment in the sector continued to decline, and output prices remained subdued, reflecting weak pricing power. 

Despite these pressures, business sentiment improved from January, buoyed by signs of recovering domestic demand and expectations of additional government support for the economy. 

China's GDP grew 5 per cent last year, reaching the official target, largely due to extensive government stimulus measures. But the economy has been grappling with challenges including a faltering property market, weakening domestic demand and rising trade tensions. 

Trump on Thursday said he would slap an extra 10 per cent duty on Chinese goods on March 4, on top of the 10 per cent tariff that he levied on February 4, worsening the trade outlook. 

Wang Zhe emphasised the importance of timely policy support, saying "March represents a critical policy window. Supportive measures should address market expectations and societal concerns, focusing on key economic bottlenecks." 

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