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BEIJING (Reuters) - China's factory activity expanded at its fastest pace in four months in March, buoyed by stronger demand and robust export orders, a private-sector survey showed on Tuesday, although the escalating U.S. trade war clouds the outlook.
The Caixin/S&P Global manufacturing PMI climbed to 51.2 in March from 50.8 in the previous month, surpassing analyst expectations of 51.1. The 50-mark separates growth from contraction.
The rebound broadly aligned with an official PMI released on Monday that showed manufacturing activity growing at its quickest rate in a year.
March's improvement was driven by accelerating new orders, with export orders rising at their fastest pace in 11 months. Analysts attribute the export surge partly to U.S. importers stockpiling Chinese goods ahead of anticipated tariff hikes.
Hiring showed signs of improvement with manufacturers adding jobs for the first time since August 2023.
"The job market remained relatively sluggish, and deflationary pressures persisted, due to insufficient effective demand at home and market participants' weak optimism," said Wang Zhe, Senior Economist at Caixin Insight Group.
The trade war also threatens to undermine momentum. U.S. President Donald Trump has imposed a cumulative 20% tariff on Chinese imports since January and is expected to announce additional "reciprocal" tariffs this week.
"We doubt the rest of the year will be much better. The budget does allow for fiscal support to be stepped up further over the coming months. But U.S. tariffs, which look set to escalate this week, will start to weigh on exports before long," said Julian Evans-Pritchard, Head of China Economics on Monday.
Input costs fell for the first time in six months, enabling factories to reduce output prices for the fourth consecutive month.
Businesses also added raw material inventories in response to stronger demand. Yet confidence among manufacturers waned slightly compared with February, reflecting caution over external uncertainties.
"In 2025, as the external environment becomes increasingly severe and complex, China’s macroeconomic policies need to be more proactive and decisive, with measures implemented as soon as possible to support a sustained economic recovery," Caixin's Wang said.
(Reporting by Liangping Gao and Ryan Woo; Editing by Sam Holmes)
