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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2025/03/107188550-1675411012194-gettyimages-1461906689-vcg111420710254-820x547.jpeg" alt="" class="wp-image-592881" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2025/03/107188550-1675411012194-gettyimages-1461906689-vcg111420710254-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2025/03/107188550-1675411012194-gettyimages-1461906689-vcg111420710254-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2025/03/107188550-1675411012194-gettyimages-1461906689-vcg111420710254-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2025/03/107188550-1675411012194-gettyimages-1461906689-vcg111420710254-768x513.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2025/03/107188550-1675411012194-gettyimages-1461906689-vcg111420710254-1536x1025.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2025/03/107188550-1675411012194-gettyimages-1461906689-vcg111420710254-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Employees work on an electronics production line on Feb. 2, 2023, at a factory in Longyan, Fujian province in China. China News Service | China News Service | Getty Images</figcaption></figure>



China’s factory activity expanded at its fastest pace in three months to 50.8 in February, a private-sector survey showed on Monday, as millions of migrant workers returned to work after an extended Lunar New Year holiday.



The seasonally adjusted Caixin/S&amp;P Global manufacturing purchasing managers’ index beat Reuters poll forecast of 50.3, also accelerating from 50.1 in January and 50.5 last December.



The private-sector manufacturing PMI has stayed above the 50 threshold that separates expansion from contraction since last October.



This private survey reading on Monday followed the official manufacturing PMI released on Saturday, which also showed that China’s February factory activity expanded at its fastest pace since November.



The official PMI rose to 50.2 in February from 49.1 in January, according to the National Bureau of Statistics. The non-manufacturing PMI, which includes services and construction, also climbed to 50.4 from 50.2 in January.



The figures came as economists flagged that fresh U.S. tariffs could pressure the country’s manufacturing activity — which accounted for a quarter of China’s GDP last year — and dent the role of exports as a key driver of growth this year.



In February, new export orders grew at the fastest rate since last April, according to the Monday survey, as “demand strengthened from foreign clients.”



The stronger external demand for Chinese manufactured goods could be due to U.S. importers continuing to front-run tariffs in anticipation of even higher levies, Zichun, Huang, China economist at Capital Economics, said in a note.



U.S. President Donald Trump last week announced to impose additional 10% tariffs on Chinese goods — on top of the 10% he levied on China on Feb. 4. Trump had threated 60% tariffs on China on his campaign trail.



The additional tariffs are scheduled to take effect on March 4, coinciding with a high-profile annual gathering in Beijing where Chinese authorities are expected to unveil economic targets for 2025 and fresh policy support.



While attention is now on potential countermeasures from Beijing, investors also await more government details on a broad stimulus plan to prop up the slowing economy, including ramped-up fiscal spending to boost domestic demand and fend off persistent disinflationary pressures.



<h2 class="wp-block-heading" id="h-patchy-recovery"><a></a>Patchy recovery</h2>



At the upcoming parliamentary meetings, China’s leadership is expected to acknowledge a significant softening in domestic demand while revealing highly anticipated details on fiscal stimulus aimed at shoring up growth in the face of heightened U.S. trade tensions.



While a combination of fiscal support and “tariff front-running” helped China’s economy regain some momentum in February, the overall growth in this quarter is likely to slow, Capital Economics’ Huang said.



“Unless the leadership unveil greater-than-expected stimulus at the National People’s Congress, it is hard to see how a slowdown can be avoided this year,” Huang said.



Plagued by lackluster domestic consumption, output prices at factories have remained under pressure, particularly consumer and investment goods that experienced sharper price declines, according to the Monday survey.



Squeezing that profit margin further, costs for copper and certain chemical products have edged higher, the survey showed.



Employment in the manufacturing sector also slumped to a near five-year low, as manufacturers continued to prioritize cost reductions, particularly among consumer goods producers.

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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2025/02/108104755-1740023049512-gettyimages-1212971284-AFP_1RK86F-820x461.jpeg" alt="" class="wp-image-591874" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2025/02/108104755-1740023049512-gettyimages-1212971284-AFP_1RK86F-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2025/02/108104755-1740023049512-gettyimages-1212971284-AFP_1RK86F-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2025/02/108104755-1740023049512-gettyimages-1212971284-AFP_1RK86F-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2025/02/108104755-1740023049512-gettyimages-1212971284-AFP_1RK86F-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2025/02/108104755-1740023049512-gettyimages-1212971284-AFP_1RK86F-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2025/02/108104755-1740023049512-gettyimages-1212971284-AFP_1RK86F.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Chinese President Xi Jinping and U.S. President Donald Trump. Dan Kitwoodnicholas Kamm | Afp | Getty Images</figcaption></figure>



China’s Ministry of Commerce said Friday that it “firmly opposes” U.S. President Donald Trump’s latest threat to ramp up tariffs on Chinese goods and vowed retaliation, if necessary.



“If the U.S. insists on its own way, China will take all necessary countermeasures to defend its legitimate rights and interests,” a Ministry of Commerce spokesperson said in a statement, translated by CNBC.



“We urge the U.S. side to not repeat its own mistakes, and to return as soon as possible to the right track of properly resolving conflicts through dialogue on equal footing.”



The statement followed Trump’s Thursday announcement that the U.S. would impose an additional 10% duty on Chinese imports on March 4, which coincides with the start of China’s annual parliamentary meetings.



The new tariffs would be on top of the 10% further tariffs that Trump levied on China on Feb. 4.



Trump announced the two rounds of China duties were being imposed in response to the Asian country’s role in the fentanyl trade. The addictive drug, precursors to which are mostly produced in China and Mexico, has led to tens of thousands of overdose deaths each year in the U.S.



“In the short term, China’s response will likely include raising tariffs on select U.S. imports, adding more American firms to its unreliable entity list, and potentially further tightening export controls on critical minerals,” Neil Thomas, a fellow on Chinese politics at the Asia Society, said by email.



He noted he nevertheless expects Beijing’s retaliation will remain “measured,” as Chinese President Xi Jinping has an incentive to meet with his American counterpart and initiate negotiations to avoid measures that put greater pressure on already sluggish economic growth.



China’s exports have been a rare bright spot in an otherwise slowing economy. The U.S. is China’s largest trading partner on a single-country basis.



While Beijing may maintain a “restrained” stance, upcoming moves will likely target industries that matter the most to Trump supporters, said Alfredo Montufar-Helu, head of the China Center at The Conference Board.



China would prefer to leave some room for further negotiations as it hopes to avoid even higher import tariffs and other “corrective” measures by Washington, he said.



After the first round of tariffs earlier this month, China’s retaliatory measures included raising duties on certain U.S. energy imports and putting two U.S. companies on an unreliable entities list that could restrict their ability to do business in the Asian country.



China has also increased controls on exports of critical minerals that the U.S. needs.



“The sharpest arrow that China has in its quiver would be to restrict U.S. access to critical minerals that can’t readily be sourced elsewhere,” said Stephen Olson, a visiting senior fellow at the Institute of Southeast Asian Studies and a former U.S. trade negotiator.



<h2 class="wp-block-heading" id="h-a-stronger-tone"><a></a>A stronger tone</h2>



Despite the lack of specifics, the Ministry of Commerce statement on Friday struck a stronger tone than the country’s response to the initial 10% duties earlier this month.



The ministry defended China’s drug control efforts and called the latest tariff threat — on grounds of illegal fentanyl flows — as “purely shifting the blame” without helping the U.S. solve its own drug problems. It also denounced the additional levies for “adding to the burdens on American businesses and consumers and disrupting the global supply chain.”



The latest communique “sends a clear message that the Chinese government is ready to respond in defense of national interests, and they won’t ‘bend the knee,’” said Montufar-Helu.



In contrast, the ministry’s statement dated Feb. 2 urged Washington to manage fentanyl issues “objectively and rationally” while cautioning the tariffs could damage normal China-U.S. economic and trade relations.



China’s Ministry of Foreign Affairs also toughened its tone in a response to the tariffs Friday. The U.S. act of “pressuring, coercing and threatening” China with tariffs will only backfire, spokesperson Lin Jian said in Chinese comments reported by state media and translated by CNBC.



Trump’s announcement of extra tariffs will “push China into a position of assuming that a deal may not be possible or may not be achievable in the near term,” Deborah Elms, head of trade policy at the Hinrich Foundation, told CNBC.



“That leaves Beijing with two options:&nbsp;either roll out continued measured responses in the hope of avoiding further escalation and maybe even rolling back existing measures; or going much bigger,” she added, as the previous “modest measures weren’t enough and the threat for future escalation wasn’t taken seriously enough.”



<h2 class="wp-block-heading"><a></a>More tariffs likely</h2>



At the start of his second term, Trump ordered his administration to investigate Beijing’s compliance with a trade deal struck during his first presidency in 2020. The final result of the assessment will be delivered to Trump by April 1.



That could set the stage for further actions of what Trump called “reciprocal tariffs,” raising duties on various countries including China to match their existing levies on U.S. imports.



In a social media post Thursday, the U.S. president confirmed that “The April Second Reciprocal Tariff date will remain in full force and effect.”

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