China Economy | March RatingDog Manufacturing PMI drops to 50.8

Despite rising prices and supply pressures, Chinese manufacturing still maintains expansion. RatingDog / S&P Global jointly released data: the March seasonally adjusted Purchasing Managers’ Index (PMI) was 50.8, down from February’s near-term high of 52.1. It was also below the market expectation of 51.5, indicating that the overall expansion momentum is slowing, but it has still remained above the 50 expansion-contraction line for the fourth consecutive month. This marks the second-highest record in the past six months.

In March, output, new orders, and employment all grew further, while purchasing activity and backlog work also rose in tandem. However, inflation pressures surged sharply, with both input prices and output prices recording the most significant increases since March 2022. Supplier delivery delays were the most severe in more than three years.

Chinese manufacturers reported that incoming new order volumes increased, driven by factors including growth in market demand, winning new customers, business expansion, promotional activities, and price advantages. Although the increase in new orders eased compared with February’s multi-year high, it still represented the second-highest level in six months. Export business volume rose, but at a slower pace than in February. Production grew for the fourth consecutive month, though the growth rate slowed.

With backlog work and new orders continuing to grow, Chinese manufacturers continued to add headcount. Employment expanded for the third consecutive month, setting the longest hiring expansion period since mid-2021. Manufacturers’ purchasing activity also expanded for three consecutive months, but—like output and new orders—it saw the growth rate slow as well, not as strong as in February.

Chinese manufacturing firms remained optimistic in March. Overall optimism weakened somewhat from February’s near-term peak, but it was still stronger than in December last year and January this year. Business confidence was driven by improving customer demand, increased investment in capacity and new products, efficiency gains, and policy support.

RatingDog founder Yao Yu said that, overall, March manufacturing continued its mild expansion trend, and the impact of the macro environment on manufacturing is becoming more complex. On the domestic policy front, the 2026 Government Work Report sets the GDP growth target in a vague range of 4.5% to 5%, which basically aligns with market expectations. This reflects the overall tone of “progress while ensuring stability,” and is expected to provide manufacturing with mild support, though the likelihood of large-scale stimulus remains low. On the overseas front, ongoing geopolitical conflicts have kept international oil prices high, intensifying volatility and cost pressures in key raw material markets. This externally imported inflation factor may continue in April to pose a serious challenge to manufacturing input costs.