China’s industrial sector expanded in February

China’s industrial sector grew more than expected in February due to increased export orders for the first time in four months, announced a government report on Thursday, supporting hopes that the second largest economy could prevent a hard landing.

The official figure of China’s purchasing managers index (PMI) rose to 51.0, above expected figure of 50.7 and higher than January figure of 50.5.

The figure of PMI from the National Bureau of Statistics is the highest since last September (51.2). A PMI above 50 indicates expansion, while under 50 signals contraction.

The PMI of China by HSBC, a leading indicator of industrial activity in the country, reached a maximum of four months to 49.7 points in February, but new export orders posted their biggest drop in eight months due to weak global demand.

The official index of new export orders rose to 51.1 in February, indicating an expansion for the first time in four months and the highest since May 2011. The new export orders shrank in January, when the index was 46.9.

New orders rose to 51.0 overall from 50.4.

“The February PMI continued to recover, which again confirms a trend that the economy is stabilizing,” said Zhang Liqun, a researcher in the Development Research Center of State Council.

“Unlike in January, last month’s expansion in the manufacturing sector is mainly driven by heavy industry,” said Zhang.

“But it is expected that exports and investment demand decline in the coming months, albeit at a slower pace. The price of raw materials is accelerating obviously, a reflection of rising inflation in imports,” he added.

The official PMI, which is closely linked with the large state-owned firms, generally shows a more optimistic picture of Chinese industries, while HSBC PMI, which includes small private companies, has been beaten by tighter credit restrictions and weaker demand.

However, China’s economy faces serious obstacles amid the decline in exports, due to weak demand from U.S. and Europe, along with a decline in real estate in response to the restrictive measures taken by Beijing.

Many expect that China’s annual economic growth to slow to just over 8% in the first quarter from 8.9% in the previous quarter, the fifth consecutive quarterly slowdown.

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