China NBS Manufacturing PMI Rebounds in February as US Tariffs Loom

China PMIs Signal Temporary Relief

On Saturday, March 1, China’s manufacturing and services sectors were closely watched amid market jitters over a potential US-China trade war.

China’s National Bureau of Statistics (NBS) Manufacturing PMI rose from 49.1 in January to 50.2 in February, climbing above the critical 50 neutral level. Meanwhile, the NBS Non-Manufacturing PMI inched up from 50.2 in January to 50.4 in February, signaling modest expansion in the services sector.

Notably, the manufacturing sector expanded after briefly contracting in January, the first contraction since Q3 2024.

Manufacturing Recovery and Industry Trends

CN Wire highlighted key trends in February’s PMI data:

• The manufacturing sector saw demand and production expand after January’s contraction.
• Industries reporting PMIs above 54.0 included non-ferrous metal smelting and rolling processing, general equipment, and electrical machinery and equipment.
• In contrast, textile and apparel, and petroleum, coal, and other fuel processing had PMIs below the 50 neutral point.
• Price indices continued to rise, which could ease deflationary concerns.

Assessing broader trends, CN Wire noted:

“In February, the Composite PMI Output Index was 51.1%, up by 1.0 percentage points from the previous month, remaining in the expansion zone, indicating accelerated recovery and development of enterprise production and business activities post-Spring Festival in China. The Manufacturing Production Index and Non-Manufacturing Business Activity Index, which constitute the Composite PMI Output Index, were 52.5% and 50.4% respectively.”

Demand and Production Key to Domestic Growth

February’s figures could be crucial for China’s economic outlook. Improving demand and productivity may boost job creation and consumer sentiment. Rising consumer confidence could make Beijing’s stimulus efforts more effective in supporting household income and driving consumption.

However, the post-Chinese New Year rebound in manufacturing sector output could reflect front-loading ahead of US tariffs on Chinese goods. This week, President Trump announced that 10% tariffs on imports from China would be effective from Tuesday, March 4. Trump also plans to impose sweeping tariffs on autos, pharmaceuticals, and semiconductor chips.

A deepening US-China trade war could hurt China’s manufacturing sector, weakening labor markets and consumer sentiment—posing a challenge to Beijing’s shift toward a consumption-driven economy.

While the National Bureau of Statistics numbers offer insights, the Caixin PMI data typically has more impact on the markets. The Caixin PMIs will be out next week.

Key PMI Survey Differences

The NBS PMI primarily tracks large state-owned enterprises across China, while the Caixin PMI focuses on small- to mid-sized firms, particularly in coastal regions. As a result, the Caixin PMI often provides a more comprehensive picture of private-sector performance.

Several Key Developments Could Dictate Market Sentiment:

It could be a crucial week ahead for global markets. Traders should consider the following events and data for near-term AUD/USD and Hang Seng Index trends:

• 10% Tariffs (March 4): If Trump implements the planned 10% tariffs and China retaliates, the Hang Seng Index, mainland Chinese equities, and the AUD/USD may face selling pressure. A tariff delay, however, could boost risk assets and commodity currencies like the Aussie dollar.
• China’s NPC Meeting: The Third Session of the 14th National People’s Congress may introduce stimulus measures aimed at bolstering domestic demand.
• China’s Economic Data Releases: The Caixin Manufacturing PMI (March 3), Caixin Services PMI (March 5), and trade data (March 7) will influence risk sentiment. Another surge in exports could provoke further US trade actions.

The Hang Seng Index slid by 2.29% in the week ending February 28, while the AUD/USD tumbled 2.41% to $0.62034 amid US tariff fears.

Discover strategies to navigate this week’s market trends here.