China’s manufacturing activity expanded in March for the first time since December, bolstered by a recent government stimulus package.
The official Purchasing Managers’ Index (PMI), released by the National Bureau of Statistics (NBS), came in at 50.1 in March, up slightly from 49.9 in February.
A figure above 50 signals expansion, while anything below indicates contraction.
The index, which tracks activity in factories and workshops, is considered a key indicator of the health of the world’s second largest economy.
Premier Li Keqiang said last month policy makers would step in to support the economy if growth slows too sharply, while central bank Governor Zhou Xiaochuan flagged room to act.
“The government won’t allow the growth to slip below 7 per cent,” said ANZ economist Zhou Hao. “I think there will be more support measures being rolled out soon to stabilise market expectations.”
Those measures could include increased infrastructure spending, additional interest-rate reductions and more cuts in bank reserves, economists said, which could see growth start to pick up in the second quarter.
“There’s a lot more to be done,” Mizuho’s Mr Shen said. “But it’s good the government has started to respond.”
The latest reading suggests China's factories, marred by deflation and overcapacity, may be starting to pick up after two interest rate cuts in the last six months and robust US demand.