Beijing, April 27

Activity in China’s manufacturing sector likely expanded modestly in April for the second month in a row, a Reuters poll showed, adding to hopes that a prolonged downturn in the world’s second-largest economy is easing.

The official manufacturing Purchasing Managers’ Index (PMI) is expected to rise to 50.4 in April from 50.2 in March, according to a median forecast of 28 economists polled.

Such a level would be the highest since October 2014, but it may be too early to tell if the rebound is simply seasonal or something more sustainable.

While slightly stronger than March, the April forecast is still not far above the 50 mark which separates expansion in activity from contraction.

A more robust reading could reinforce views that policymakers can now take a less aggressive stance after a more than one-year blitz of fiscal and monetary stimulus.

To be sure, economists believe the long suffering manufacturing sector is beginning to benefit from a recovery in the property market, which is boosting demand for materials from cement to steel.

China’s property investment growth quickened to 6.2 per cent in the first three months of 2016 as national sales growth accelerated to a near three-year high on a range of official stimulus measures.

Exports also returned to growth in March for the first time in nine months, though global demand still appears stubbornly sluggish.

“The pick-up in recent activity is underpinned by the real estate sector and de-stocking of property market,” said Raymond Yeung, an economist with ANZ Bank.

Strong loan growth and a recovery in prices of some raw materials such as steel and iron ore may also have been factors, he said.

Profits earned by China’s industrial companies rose 11.1 per cent in March from a year earlier, accelerating from the January-February period, the National Bureau of Statistics said today.

First-quarter profit gains were largely led by chemical companies and agricultural and food processing companies, but ‘old economy’ heavy industry and mining continued to struggle, with ferrous metal smelting and rolling firms seeing profits fall.

The official manufacturing PMI data will be released on May 1, along with the official services PMI. The Markin/Caixin factory PMI, a private and separate gauge of manufacturing activity, will be released on May 3.