China’s Factory Activity Hits 1-Year High Amid Rising War Risks

As global risks rise, China’s factory activity is showing signs of recovery. China’s manufacturing activity expanded at its fastest pace in a year in March, supported by improving demand.

The official PMI rose to 50.4 from 49.0 in February, crossing the key 50 mark and beating expectations. Output and new orders rebounded strongly, though export orders remained slightly below the growth threshold.

The manufacturing sector had been in contraction for most of 2025 and early 2026, making this recovery notable. Services and construction activity also improved, with non-manufacturing PMI rising to 50.1.

The rebound was partly driven by post–Lunar New Year recovery, as factories resumed operations and activity picked up.

Strong exports, especially in electronics and semiconductors, continue to support growth.

However, rising raw material costs and global tensions, including the Middle East conflict, pose risks to supply chains and margins.

Higher costs could impact jobs and wages, adding pressure on already weak domestic demand. While China aims to shift towards consumption-led growth, external risks may weigh on the economy in the near term.

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