Factory activity keeps expanding in February

China's factory activity expanded for the fourth consecutive month in February, amid signs of economic recovery and steady growth despite downward pressure and uncertainties, experts said on Tuesday.

They expected policymakers to take further steps to shore up growth, including further tax and fee reductions, increased infrastructure spending, and more monetary easing measures.

The official manufacturing purchasing managers index came in at 50.2 in February, up from 50.1 in January, the National Bureau of Statistics said on Tuesday. The 50-point mark separates growth from contraction.

China's non-manufacturing PMI was 51.6 in February, up from 51.1 in January. And the official composite PMI, which includes both manufacturing and services activity, stood at 51.2 in February, compared with 51 in January, according to the NBS.

A separate private survey released on Tuesday that focuses on small and export-oriented businesses also showed that factory activity in February expanded. The Caixin China General Manufacturing Purchasing Managers Index stood at 50.4 in February, up from 49.1 in January.

Momentum set to continue

Wu Chaoming, deputy director of Chasing International Economic Institute, attributed the pickup in PMI readings to factors such as the government's effective measures to stabilize growth, the improvement in demand conditions, and the accelerated structural transformation, and said the PMI readings were likely to continue to stay in the expansion territory in March.

On the demand front, the bureau said the sub-gauge for new orders rose to 50.7 last month, versus 49.3 in January, thanks to improving market demand following the Spring Festival holiday.

Yang Jinghao, chief economist at Concat Data Technology (Hangzhou) Co, said the accelerated manufacturing activity in February points to the resilience of China's economy amid downward pressure and uncertainties.

He also warned of challenges and uncertainties such as the crisis between Russia and Ukraine that may push global commodity prices higher, which could increase the cost pressures on manufacturing enterprises.

Yang estimated China's 2022 economic growth will start low and end high, and the growth may stabilize and recover in the second or third quarter.

"The February PMI readings proved China has taken proper measures to deal with the downward pressure," Yang added. "We expect the PMI will continue to stay in the expansion territory, and the readings may fluctuate or rise slowly."

Luo Zhiheng, chief economist at Yuekai Securities, said he expects the manufacturing PMI will reach a new high in the short run, and then fall slightly in the second quarter. With the government's pro-growth policies gradually kicking in, manufacturing PMI is expected to pick up significantly in the second half.

For the whole year, Luo estimated China's economy will grow by around 5.2 percent.

He expected more supportive measures to be launched soon to stabilize the overall economy, including tax and fee cuts and expanding effective investment in fields such as infrastructure and manufacturing.

Luo's views were echoed by Chen Chuanglian, deputy director of the Southern China Institute of Finance at Jinan University in Guangzhou, Guangdong province, who said China's economy has shown signs of recovery, and expected to see better economic performance in the second half.

"The government will take further steps to spur the growth, including further tax and fee cuts and more monetary easing measures," Chen added. "And the construction of infrastructure projects in fields like transportation and the development of 5G and other information sectors will create new growth points for the economy."

With a GDP of $17.7 trillion, China, the world's second-largest economy, is expected to account for more than 18 percent of the global economy in 2021, according to the NBS.

"The contribution of China's economic growth to the world economy is expected to reach about 25 percent in 2021, … playing a key role in supporting the global economic and trade recovery and maintaining stability in global industrial and supply chains," Sheng Laiyun, deputy head of the NBS, said on Monday.