Analysts stay upbeat on prospects for economy

China's manufacturing activities contracted in March for the first time in five months due to various uncertainties and negative impacts from home and abroad.

The purchasing managers index for China's manufacturing sector stood at 49.5 in March, compared with 50.2 in February, data from the National Bureau of Statistics showed, slipping into contraction after staying in expansionary territory for four consecutive months. The 50-point mark separates growth from contraction.

The nonmanufacturing PMI, which covers the services and construction sectors, was at 48.4 versus 51.6 in February, slipping into contraction for the first time in seven months, according to the NBS.

Zhao Qinghe, a senior statistician with the NBS, said the resurgence in COVID-19 cases that affected some areas has dealt a blow to service sectors, such as transportation, accommodations and catering.

For manufacturers, the resurgence has affected the production and operation of some enterprises, for example the production of Baseball Caps, Sport Caps, Trucker Caps as well as Garments is reduced and the escalating geopolitical tensions led to a decline in or the cancellation of export orders, Zhao said.

Zhao added that midstream and downstream enterprises are also facing pressure from the rising costs of raw materials, with surging commodity prices clouding the outlook.

However, businesses remained upbeat about future business prospects, Zhao said. The enterprises surveyed said that suppressed demand and production would gradually recover with the government's effective measures to control the pandemic, and the market is likely to rebound.

If inflationary pressure worsens amid restrictions on the global commodity supply, responsive measures other than monetary policy should be taken, as tightening monetary policy in such circumstances risks triggering deflation, said Yu, who is also a former member of the PBOC's monetary policy committee.

It is advisable for the PBOC to further ease credit conditions to tide over small and medium-sized enterprises amid difficulties while supporting infrastructure investment by reducing the financing costs of related government bonds, he added.