China's Manufacturing Growth Accelerates Amidst US-China Trade Tensions

China's manufacturing sector expanded at its fastest pace in a year, according to a Reuters report citing official data. The surge in March coincides with intensifying US-China trade tensions.

The official purchasing managers' index (PMI) rose to 50.5, its highest level since March 2024, indicating expansion for the third consecutive month. The index also exceeded analysts' forecasts.

The official non-manufacturing PMI, encompassing services and construction, also accelerated to 50.8 from 50.4 in February.

"The official PMIs suggest that infrastructure spending is ramping up again and that exports have so far remained resilient in the face of U.S. tariffs," said Julian Evans-Pritchard, head of China economics at Capital Economics, to Reuters. "But the surveys are still consistent with slower GDP growth in Q1 amid weakness in the service sector."

The improved economic performance likely stems from a combination of increased domestic demand and front-loading of exports by foreign buyers in anticipation of further US tariffs. US President Donald Trump is set to announce new "reciprocal" tariffs this week, potentially adding more levies on Chinese goods.

Trump has already imposed a cumulative 20% tariff on all Chinese imports since January, citing Beijing's insufficient efforts to curb fentanyl flows into the US.

Despite these challenges, China has maintained its economic growth target for 2024 at "around 5%." The government has pledged increased fiscal stimulus, further monetary easing, and a greater emphasis on boosting domestic demand to mitigate the impact of the trade war.

The new orders sub-index rose to 51.8 in March, its highest reading in 12 months, signaling improved domestic demand. While the decline in new export orders slowed, it narrowly missed the 50-mark, indicating continued but weaker export growth.

"It's good, but not good enough," said Xu Tianchen, senior economist at the Economist Intelligence Unit, to Reuters. "I'm pretty worried about the output prices, which fell despite the increase in new orders."

Economists caution that these positive trends may not last.

"We doubt the rest of the year will be much better," said Evans-Pritchard. "The budget does allow for fiscal support to be stepped up further over the coming months. But US tariffs, which look set to escalate this week, will start to weigh on exports before long."