China factory activity gathers steam in February

Chinese manufacturing activity expanded in February, official figures showed Wednesday, in a sign of strength for the world's second-largest economy as Beijing attempts a difficult economic transition.

The official purchasing managers' index (PMI), which gauges conditions at factories and mines, came in at 51.6 in February, the National Bureau of Statistics (NBS) said.

That beat the median forecast of 51.2 in a Bloomberg News survey of economists and was up from the previous month's 51.3.

A figure above 50 marks an expansion of manufacturing activity, and below 50 a contraction.

The expansion in factory activity was driven by a pickup in domestic and overseas demand, with sustained improvement in production of high-tech equipment, NBS analyst Zhao Qinghe said in a statement.

"The upbeat momentum may last throughout the first quarter," Tommy Xie of OCBC Bank told Bloomberg.

But he added that accelerating factory activity will increase inflation pressure in China, where prices for goods at the factory gate have been rising for five straight months.

"There's certainly an upside risk to growth," said Raymond Yeung, chief greater China economist at ANZ research, adding that "a strong infrastructure pipeline and better-than-expected exports bode well for the near-term economic outlook".

The National People's Congress will be held this weekend, where leaders are expected to slightly weaken China's growth target this year in order to focus more on deleveraging and destocking excess capacity in steel and other industries.

China is a vital driver of global growth, but its economy expanded only 6.7 percent in 2016 -- its weakest rate in a quarter of a century.

Beijing has said it wants to reorient the economy away from relying on debt-fuelled investment and towards a consumer-driven model, but the transition has proven challenging.

source: AFP