China’s factory activity growth hits 3-month high in February, as millions return to work after holidays - CNBC

China's factory activity growth has reached a three-month high in February, signaling a potential upswing in the country's economic performance. This growth surge comes as millions of individuals return to work following the holiday season. The country has been grappling with sluggish domestic demand and an ongoing downturn in the real estate sector, positioning exports as a crucial contributor to economic growth. The recent uptick in factory activity, as reported by CNBC, offers a glimmer of hope amidst the economic challenges, suggesting that China's manufacturing sector may be on the path to recovery.

China, the world's second-largest economy, has been grappling with a prolonged downturn in the real estate sector, and tepid domestic demand. However, the country's factory activity has emerged as a beacon of hope, registering a growth that has not been seen in the last three months. The Purchasing Managers' Index (PMI), a key gauge of manufacturing activity, hit a three-month high in February, indicating a robust expansion in the sector.

Despite the challenges brought by the Lunar New Year holidays, when factories traditionally close for weeks, the rapid rebound in activity post-holiday has been encouraging. Millions of Chinese workers returned to their jobs, driving up production and, in turn, factory activity. This return to work, following the Lunar New Year, is often a crucial period for the Chinese economy, setting the pace for the rest of the year.

The strong factory activity is largely attributed to the country's resilient export sector. With the global economy slowly recovering from the COVID-19 pandemic, demand for Chinese goods has surged, supporting the manufacturing sector. Despite domestic pressures, the export-dependent economy has managed to maintain steady growth, demonstrating the country's economic resilience and adaptability.

However, analysts caution that the country's strong manufacturing performance may not be sustainable in the long term, given the uncertainties in global demand and the ongoing real estate crisis. The over-reliance on the export sector could pose risks to the economy, especially if global conditions change unexpectedly. Therefore, while the recent surge in factory activity provides some cause for optimism, it also underscores the need for China to diversify its growth drivers.

The rapid increase in factory activity has provided a much-needed boost to China's domestic economy. In recent years, the country has grappled with a cooling real estate market and sluggish domestic demand. The strong performance of the manufacturing sector has created a positive ripple effect, leading to increased economic activity in other sectors.

However, despite the robust growth, some economists warn that the recovery may be uneven. Areas that rely heavily on the real estate sector for growth, for instance, may not see the same benefits. A prolonged downturn in real estate could also potentially dampen consumer spending, which would in turn impact domestic demand.

Nevertheless, the upturn in factory activity suggests that China's economy may be more resilient than previously thought. It indicates that the country's economic recovery is not solely dependent on exports, but also on the strength of its domestic manufacturing sector.

Looking ahead, the key challenge for China will be to sustain this momentum and ensure that growth is broad-based and inclusive. This will require continued efforts to stimulate domestic demand and further diversify the economy.

Exports have long played a pivotal role in China's economy, with the country being the world's top exporter for many years. As domestic demand and real estate continue to struggle, the significance of exports to the overall economic growth has only increased.

According to Dr. Meng Wei, a senior economist at the National Development and Reform Commission, "Exports have been a stabilizing factor in China's economic growth. With the current sluggish domestic demand and real estate downturn, it is expected that exports will continue to be a main driver of growth for the foreseeable future."

However, the reliance on exports also exposes the Chinese economy to external shocks and changes in the global market. This makes it crucial for the government to implement measures to stimulate domestic demand and diversify the economy.

China's factory activity has been a key driver of growth amid tepid domestic demand and a prolonged real estate downturn. The increase in February to a three-month high represents a positive indicator for the nation's economy, particularly as millions of workers returned to their jobs following the holiday period. This growth is a testament to the resilience and adaptability of China's manufacturing sector, despite the challenges faced.

However, it is important to remember that the pace of growth will need to be sustained in order to offset the current downturn in the domestic market. As such, the trajectory of China's factory activity in the coming months will be closely watched by economists and investors alike. With the global economic landscape still uncertain, the resilience of this sector is crucial to China's overall economic stability.

Source: https://www.cnbc.com/2025/03/03/china-february-caixin-pmi.html