China: PMI manufacturing returned to expansion territory in March – Nordea

Chinese PMI manufacturing returned to expansion territory in March, but it should not be seen as evidence for activity is back at normal, as Nordea’s analyst Amy Yuan Zhuang notes. USD/CNY trades at 7.0976.

Key quotes

“The Caixin/Markit reading was 50.1 and the official was 52, both surprised the market consensus by a big margin.”

“Despite the positive surprises, we do not take these data as a sign that the Chinese industrial sector is back to normal.”

“Given the global spread of the virus, we see little room for the export orders to return to above 50.”

“We expect the industrial sector to lead the recovery in the Chinese economy, especially the large manufacturers. Most high-frequency indicators show that the service sector lags behind that of the manufacturing sector.”