China’s factory activity expanded in March, according to official data released March 31, ending two months of contraction as the government’s manufacturing survey rebounded. The National Bureau of Statistics said the manufacturing purchasing managers index rose to 50.4 from 49 in February, a move economists said reflected a stronger start for output even as the Iran war continues to pose risks for growth.
The PMI is reported on a scale of 0 to 100, and the agency’s metric uses the standard interpretation that a reading above 50 signals expansion. Analysts in the AP report said the most recent official readings covered a period after the Iran war began on Feb. 28, but they cautioned that the full effect of the conflict—especially through energy and shipping—may take longer to show up in China’s factory data.
BNP Paribas economist Jacqueline Rong told AP that, in the near term, the disruptions expected from the war’s energy shock had not yet arrived in a way that materially disrupted operations. “So far supply disruptions have not occurred in a material way,” Rong said, describing early-stage impacts as limited at the time of the survey period.
The broader context for China’s rebound includes weakness in domestic demand tied to a years-long property sector slump, which has weighed on consumption and investment. With China relying in part on exports—particularly to Southeast Asia and Europe—to support economic activity, analysts said trade could become a key channel through which the war either helps or hurts industrial momentum.
Rong warned that China’s export engine could face headwinds if higher energy costs persist and supply chains continue to be disrupted. She pointed to the Strait of Hormuz as a critical shipping choke point: the AP report said that with most maritime traffic blocked from passing through the strait—through which roughly a fifth of the world’s oil normally passes—industrial input bottlenecks could emerge beyond crude and refined fuels.
Rong said the extent of the impact depends on how long energy flows remain disrupted. “If it is months, rather than weeks, then the supply disruptions, not just from oil, but also from the shortage of many chemical products — such as rare gases — would manifest itself in disrupting industrial production and services,” she said, outlining a mechanism through which industrial supply constraints could broaden over time.
Economists also said global demand could weaken if the energy crisis raises inflation and pressures consumption, which in turn could reduce demand for Chinese goods. The AP report further noted that U.S.-China trade matters for the outlook, with China’s exports to the United States declining over recent months and investors watching for signs of improvement ahead of what is expected to be a May meeting between President Donald Trump and Xi Jinping.
China’s growth target also set expectations for the year. In early March, Chinese leaders announced a target range of 4.5% to 5% for this year, a slightly lower goal than last year’s “around 5%” and the lowest growth target since 1991, according to the AP report.
For now, Capital Economics China economist Zichun Huang said in a research note that China’s economy “appears to have weathered” the early energy shock, while also warning that “it is likely that the fallout from the Iran war will grow over the coming months.” Analysts, meanwhile, said expectations for exports may receive some offset if tariffs change—citing, in the AP report, that a recent Supreme Court ruling against Trump’s wide-reaching global tariffs could provide a small boost to China’s exports and factory activity.