Factory activity in China unexpectedly bounced back after a collapse the previous month when the country was forced into lockdown, according to an influential survey.
The country’s official Purchasing Managers’ Index (PMI) rose to 52 in March – a sharp recovery after plunging to a record low of 35.7 in February. Anything above the 50 mark signals growth.
It suggests the country is bouncing back quickly after massive lockdowns to contain the coronavirus outbreak – but analysts warned that steady growth is by no means guaranteed as the rest of the world imposes strict quarantines.
Analysts polled by Reuters had expected the March PMI to come in at 45.
China’s National Bureau of Statistics said the surprise rebound in PMI was triggered by its fall to a record low base in February, and warned that the readings do not mean that economic activity has stabilised.
Many analysts said China’s businesses now face a longer struggle due to the rapid spread of the virus across the world, unprecedented lockdowns in several countries and the near-certainty of a global recession.
Economists are already forecasting a steep contraction in China’s first quarter gross domestic product, with some expecting a year-on-year slump of 9pc or more – the first contraction in three decades.
Nie Wen, economist at Shanghai-based Hwabao Trust, said that weak export orders, rising stockpiles and low prices mean Chinese factories will suffer from a slump in demand just as they are coming back online.
He said: “The biggest problem facing China’s economy in the second quarter is the slumping foreign demand.”
A further state spending splurge is now likely to shore up the country’s economy, he said.
Manufacturers’ new export orders were still mired in contraction after rising to 46.4 from 28.7 in February.
Factories continue to face huge challenges, the survey showed. More than half of those responding reported a lack of market demand and 42pc said they are strugglnig with finances, both up from the previous month.
Markets reacted positively to the PMI survey, with Asian stocks rising as investors cheered a rare bit of good news.
Beijing, at great costs to the economy, imposed draconian quarantine rules and travel restrictions to curb the Covid-19 pandemic after it broke out in Wuhan late last year.
But as locally transmitted infections dwindle, most businesses have reopened and life for millions of people has started to slowly return to normal.
China is now fighting to stop a second wave of infections from abroad.