BEIJING (Reuters) – China’s factory activity likely contracted for a second month in February, keeping alive calls for even more stimulus to prop up depressed domestic demand in the world’s second-largest economy as manufacturers brace for fresh U.S. tariffs.
A Reuters poll of 21 economists forecast the official purchasing managers’ index (PMI) will come in at 49.9, up from January’s 49.1 but still below the 50-point threshold that separates growth from contraction in activity.
China’s $18 trillion economy hit the government’s growth target of “around 5%” in 2024 though in an uneven manner, with exports and industrial output far outpacing retail sales while unemployment remained stubbornly high.
Beijing is expected to maintain the same growth target this year, but analysts are uncertain over how quickly policymakers can revive sluggish demand, even as U.S. President Donald Trump’s punitive trade curbs put more pressure on Chinese exporters.
To sustain growth and counter rising external pressures, policymakers have pledged higher fiscal spending, increased debt issuance and further monetary easing.
Trump on Thursday said he would slap an extra 10% duty on Chinese goods on March 4, on top of the 10% tariff that he levied on Feb 4 over the fentanyl opioid crisis, to push Beijing to do more to stop the trafficking of the deadly drug.
That would result in a cumulative 20% tariff, which is still lower than the 60% curb he threatened on the campaign trail.
More than half of respondents expect the PMI to show factory conditions worsened in February, with Pantheon, a global markets investor, returning the lowest reading of 49.0. Six forecast a return to expansion, led by DZ Bank who predicted a PMI of 50.5.
Investors are looking to the annual parliament meeting that will begin on March 5, when the government is expected to unveil fresh stimulus measures, alongside economic targets.
Further support for the struggling property sector and indebted local developers could also be announced, which significantly impacts domestic demand and local government finances.
Getting Chinese consumers spending again would reduce producers’ exposure to Trump’s tariff threats.
Analysts polled by Reuters forecast the private sector Caixin PMI rose 50.3, from 50.1 in January. The data will be released on March 3.
(Reporting by Joe Cash; Polling by Vijayalaksmi Srinivasan and Devayani Sathyan; Editing by Shri Navaratnam)
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