China's economy ends Q1 on a high note

The first quarter ended on a positive note for the Chinese economy. The National Bureau of Statistics (NBS) has once again published optimistic statistics: the Chinese manufacturing PMI index, calculated by Caixin Media and S&P Global, rose to 51.1 points in March, slightly exceeding economists' forecasts (50.0). This is the strongest growth since February 2023, notes the NBS. In February of this year, the readings were 50.9 points. It is important to note that an index value above 50 indicates economic growth.
Last week marked the second confirmation of the stabilization of the planet's second economy. The Caixin/S&P index data was released shortly after similarly encouraging data, which showed that manufacturing activity in March was the strongest in 11 months, with 50.8 points compared to the forecast of 49.9.

Data confirms the gradual stabilization and recovery of the Chinese economy. Activity in the non-manufacturing sector is the highest since June 2023. Additionally, there is encouraging data on export and retail sales growth.
“The manufacturing sector continued to recover in March due to increasing supply and demand,” commented Wang Zhe, senior economist at Caixin Insight Group, on the data.

In early March, official data was released outlining the tasks set for the Chinese economy this year. During the spring session of the Chinese Parliament (NPC), it was announced that the GDP should increase by approximately 5% by the end of 2024. Simultaneously, the deficit-to-GDP ratio should not exceed 3%. The objective of achieving 'high-quality growth' for the economy has been established.

Due to the high baseline for 2023, several economists doubt that this challenging goal can be attained without increased government support for the economy. The most significant doubts among experts are related to producer prices, which have been decreasing in China for over a year. Regarding consumer prices, they have decreased in four out of the last five months.
Manufacturers have increased their purchases of raw materials due to improving business optimism. However, employment remains weak and the situation with prices, which continue to decline, is worsening.

This makes the situation worse for sellers but improves it for buyers. The reduction in prices for raw materials has reduced the cost of production for manufacturers, which is an obvious advantage in conditions of fierce market competition. The economist states that production costs and prices for finished products are currently the lowest since July 2023.

However, there have been no noticeable results in the fight against the crisis in the construction industry of the Middle Kingdom and in the real estate market. This has been slowing down the recovery of the Chinese economy for the last two-plus years.

However, despite the prevailing scepticism in comments on the current state of the Chinese economy and forecasts for the year, recent data suggests that it has exceeded the expectations of pessimistic forecasters, or perhaps they were simply mistaken.