BEIJING: Chinese factory activity expanded in February, data showed Wednesday, the latest sign of stability in the world's number two economy.
The figures come days before the country's leadership meets for its rubber stamp parliament that will set its goals for the year, with an eye on a difficult realignment of economic priorities.
Beijing's 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, beating the 51.2 forecast in a Bloomberg News survey and up from the previous month's 51.3.
A figure above 50 indicates growth while anything below points to contraction.
The rise 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 News.
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 and are sitting at more than five-year highs.
"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 readings follow data showing exports beat expectations in January, while economic growth also beat forecasts in the last quarter of 2016, although it expanded only 6.7 percent over the year-- its weakest rate in a quarter of a century.
The stronger external demand backing China's factory activity is not likely to be sustained, Julian Evans-Pritchard of Capital Economics said in a note, adding that growth is expected to wane in the country's major trading partners.
"Domestic demand growth in China, which appears to have plateaued recently, will slow in the coming quarters as a tighter monetary and fiscal stance continues to weigh on credit growth and infrastructure investment," he added.
The Purchasing Manager's Index compiled by Chinese financial magazine Caixin, which focuses on smaller manufacturers, also showed a recovery, hitting 51.7 in February, up from 51.0 the previous month, the magazine said in a joint statement with data compiler IHS Markit.
"It is premature to jump to the conclusion that the recovery is entrenched," Caixin analyst Zhong Zhengsheng said in the statement.
"The second quarter is likely a key period to look at for future trends," he added.
This weekend sees the Communist Party hold its annual National People's Congress, where leaders are expected to slightly weaken their growth target for 2017 to focus more on reducing debt and on lowering excess capacity in steel and other industries.
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, leading to the slower growth readings in recent years.
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