Major economic uptick: China’s manufacturing PMI rebounds in February powered by the aluminium industry

China's factory activity accelerated in February, fuelled by stronger supply, rising demand, and a rebound in export orders, according to a private-sector survey released Monday. Seasonal factors linked to the holiday period also contributed to the growth. The Caixin/S&P Global manufacturing PMI climbed to 50.8 per cent, up from 50.1 per cent in January, reaching a three-month high and surpassing analysts' expectations of 50.3 per cent, as predicted in a Reuters poll.

However, towards the end of December, China's aluminium demand faced a major backlash due to the construction sector's deteriorating market condition. As a result, the government introduced some extensive stimulus measures to help the industry grapple with the ongoing challenges. Spearheaded by the People's Bank of China (PBOC), the package included –

• The PBOC implemented bold monetary policies, including deeper-than-expected cuts to both the policy interest rate and the reserve requirement ratio (RRR). The RRR will be reduced by 0.5 percentage points, injecting approximately RMB 1 trillion (US$137 billion) into the financial system, with the possibility of further cuts ranging from 0.23 to 0.5 percentage points later this year.
• Mortgage rates on existing homes will be reduced by around 0.5 percentage points, providing homebuyers with an estimated RMB 150 billion (US$21.1 billion) in interest savings. This initiative aims to ease financial pressures, stimulate household spending, and encourage investment in the housing market.
• Liu Shijin, former deputy director of the Development Research Centre of the State Council, has called for a RMB 10 trillion (US$1.37 trillion) stimulus package, potentially funded through ultra-long-term government bonds. These funds would be allocated to vital sectors such as public services, affordable housing, and infrastructure, with a particular focus on small and medium-sized cities where housing demand — especially among migrant workers — remains high.

Caixin/S&P Global manufacturing PMI