China’s Manufacturing Sector Gains Momentum in March as Exports Surge, Caixin PMI Shows

China’s manufacturing activity expanded at its fastest pace in four months in March, driven by stronger demand and a surge in export orders, according to a private-sector survey released on Tuesday. However, escalating trade tensions with the United States could cloud the outlook for the rest of the year.

The Caixin/S&P Global Manufacturing Purchasing Managers' Index (PMI) climbed to 51.2 in March, up from 50.8 in February, exceeding analysts' expectations of 51.1. A reading above 50 indicates expansion, while below 50 signals contraction.

This uptick aligns with the official PMI data released on Monday, which showed that factory activity grew at its fastest pace in a year.

Export Boom Amid Trade Uncertainty

March’s improvement was largely fueled by a sharp increase in new orders, with export demand growing at its fastest rate in 11 months. Analysts attribute this boost partly to U.S. importers stockpiling Chinese goods ahead of expected tariff hikes.

Hiring trends also showed signs of improvement, as manufacturers added jobs for the first time since August 2023.

"The labor market remained relatively sluggish, and deflationary pressures persisted due to insufficient domestic demand and weak market optimism," said Wang Zhe, senior economist at Caixin Insight Group.

Trade War Risks Loom Large

Despite the upbeat data, the ongoing trade dispute with the U.S. poses a significant risk. 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 allows for increased fiscal support in the coming months, but the U.S. tariffs—set to rise this week—will soon weigh on exports," said Julian Evans-Pritchard, head of China Economics at Capital Economics.

Meanwhile, input costs fell for the first time in six months, allowing factories to cut output prices for the fourth consecutive month.

While the manufacturing sector has gained momentum, the broader economic outlook remains uncertain, with external pressures and domestic demand challenges still in play.