China's factories see growth for first time in six months
China's manufacturing sector exhibited signs of recovery in March, marking the first expansion in six months, according to a recent official factory survey. The official purchasing managers' index (PMI) rose to 50.8 in March from 49.1 in February, surpassing the critical 50-mark that distinguishes growth from contraction. The increase exceeded the median forecast of 49.9 predicted by Reuters.
Economic respite amidst ongoing property crisis
This growth in the manufacturing sector offers some relief to policymakers who have been dealing with economic sluggishness since late 2022 when China relaxed its strict COVID restrictions. Despite the ongoing property sector crisis affecting the economy and confidence, recent positive indicators suggest that the world's second-largest economy is gradually recovering. "March data show the economy is poised for a strong end to Q1," stated China Beige Book, an advisory firm.
Property sector slump continues to challenge growth
Despite the positive signs, the severe slump in China's property sector remains a significant drag on growth. The situation is testing the financial health of heavily indebted local governments and state-owned banks' balance sheets. The official non-manufacturing PMI, which includes the services and construction sectors, rose to 53 from 51.4 in February, marking its highest reading since September.
China sets ambitious economic growth target for 2024
At the annual meeting of the National People's Congress earlier this month, Premier Li Qiang declared an ambitious economic growth target of around 5% for 2024. Analysts believe that policymakers will need to implement more stimulus measures to achieve this target. They argue that relying on a low statistical base of 2022, which favored 2023 growth data, will not be sufficient.
Citi raises China's economic growth forecast for 2024
This year, Citi increased its economic growth forecast for China to 5.0% from 4.6%, citing "recent positive data and policy delivery." On March 1, China's cabinet passed a plan aimed at promoting large-scale equipment upgrades and sales of consumer goods. The country's state planner stated earlier this month that the plan could generate market demand of over $690 billion annually.
