China's March factory activity likely contracted for sixth month, at slower pace

By Joe Cash

BEIJING (Reuters) - China's manufacturing activity likely contracted for a sixth straight month in March but at a slower pace, a Reuters poll showed on Thursday, suggesting factory owners are still struggling for orders despite some green shoots in the economy.

The official purchasing managers' index (PMI) likely rose to 49.9 in March from February's 49.1, according to the median forecast of 21 economists in the poll. The 50-point mark separates growth from contraction.

Recent economic indicators have shown the world's second-biggest economy made a bright start to the year, offering some relief to policymakers as they try to shore up growth amid weakness in the property sector and mounting local government debt.

Profits at China's industrial firms jumped 10.2% in the first two months from a year earlier, data from the National Bureau of Statistics showed on Wednesday, following a 2.3% profit decline for the whole of 2023.

Chinese Premier Li Qiang announced an ambitious 2024 economic growth target of around 5% earlier this month at the annual meeting of the National People's Congress, China's rubber-stamp parliament.

Analysts say policymakers will need to roll out much more stimulus to hit this year's growth target as they will not be able to count on the low statistical base of 2022, when the country's strict zero-COVID curbs were in place.

Citi on Thursday raised its economic growth forecast for China for this year to 5.0% from 4.6%, citing "recent positive data and policy delivery".

China's cabinet on March 1 approved a plan aimed at promoting large-scale equipment upgrades and sales of consumer goods that the head of the country's state planner told a news conference earlier this month could generate market demand of over 5 trillion yuan ($691.63 billion) annually.

Many analysts worry that China may begin flirting with Japan-style stagnation later this decade unless policymakers take steps to reorient the economy towards household consumption and market-allocation of resources.

The official PMI will be released on Sunday. The private Caixin factory survey will be released on April 1, and analysts expect its reading to edge up to 51.0 from 50.0.

($1 = 7.2293 Chinese yuan renminbi)

(Reporting by Joe Cash; Polling by Veronica Khongwir and Devayani Sathyan in Bengaluru; Editing by Ros Russell)