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Chief economist update: Chinese manufacturing ramps up

Activity in China's manufacturing and non-manufacturing sectors returned with a vengeance after a brief pause during the country's Lunar New Year holidays.

National Bureau of Statistics (NBS) data show that China's manufacturing PMI rebounded to a three-month high of reading 51.9 in March from 50.6 in February. This marks the 13th straight month of expansion in factory activity with output, new orders and buying orders rising to three-month peaks and export sales returning to expansion.

Likewise, the NBS reports that China's non-manufacturing PMI increased to a reading of 56.3 in March - the highest in four months - from 51.4 in February. This marks a full year of expansion in the country's services sector, underpinned by the return to growth in new orders and new export orders.

Most of the commentaries revolved around the lift in "export orders" due to the improvement in the global economy on the back of widening roll-out of the coronavirus vaccine.

Then again, China's trade account also benefitted even when covid-19 was eating through the economies of other countries, exporting masks and personal protective equipment (PPE) to them.

These recent data confirm expectations for strong growth in the Chinese economy this year.

The OECD's March 2021 'Interim Economic Outlook' report pencilled in a 7.8% expansion this year. In January this year, the World Bank (WB) forecast China's GDP to grow by 7.9% in 2021 predicated on "the release of pent-up demand and a quicker-than-expected resumption of production and exports". In the same month, the IMF predicted China's economy to expand by 8.1% this year due to "effective containment measures, a forceful public investment response, and central bank liquidity support.

China's reaping the fruits of its early containment of the coronavirus - draconian as they were - and with lesser government spending. figures reveal that as at March 2021, the value of China's covid-19 stimulus package amounted to 4.7% of GDP.

This compares with 54.5% for Japan, 35.9% for Germany, 26.5% for the US (excluding Biden's new stimulus proposals worth around US$4 trillion) and 17.8% for the UK.