China Factory Activity Returns To Expansion But Trade Risks Grow

China's factory activity returned to expansion in February, a sign of resilience in an economy hit by higher US tariffs and suffering from weak domestic demand.

The official manufacturing purchasing managers' index was 50.2, versus 49.1 in January, the National Bureau of Statistics said Saturday. The median forecast of economists surveyed by Bloomberg was 49.9. A number above 50 points signals growth.

The non-manufacturing measure of activity in construction and services rose to 50.4 from 50.2 last month, the statistics office said. That's in line with the forecast of 50.4. 

The PMI figures are the first official data available each month to provide a snapshot of the health of the Chinese economy, whose outlook is in flux as the trade war intensifies with the US. The stabilization of factory activity in February means less pressure on China's government to speed up stimulus measures on the manufacturing sector when top officials meet in Beijing this week for an annual parliamentary meeting.  

The Trump administration has taken aim at China with a series of moves involving investment, trade and other issues, and most recently threatened an additional 10% tariff that would take effect March 4.

President Xi Jinping urged officials to stay composed amid domestic and global challenges, signaling Beijing will take a measured approach to the new restrictions imposed by the US.

Xi recently hosted a meeting with tech bosses including Alibaba Ltd. co-founder Jack Ma, in a bid to restore confidence in the private sector. Some economists expect the upcoming national parliament meeting to introduce measures to drive consumption.

China's economy grew more than expected in 2024, thanks to a late blitz of supportive policies and an export boom. But the recovery has remained uneven, with manufacturing at times a bright spot while consumption has been weighed down by a weak job market and a prolonged real estate crisis. 

China's trade surplus soared to near an unprecedented $1 trillion last year. The growing imbalance has spooked the nation's trade partners, who accuse Beijing of building excess capacity in its industries through state subsidies and increasingly look to erect new barriers that may hold back sales of key products like electric vehicles.