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A worker walks past Chinese trucks for exporting at a port of Liangyungang, Jiangsu province, March 31, 2013. China's official manufacturing purchasing managers' index (PMI) released by the National Bureau of Statistics rose to an 11-month high of 50.9 in March, above the 50-point level that indicates growth on the month.

CHINA DAILY/Reuters

Stronger domestic demand helped China's factory activity to rebound in March, with new orders up sharply in a sign that the underlying economic recovery is strong enough to weather any risks from patchy export performance, surveys showed on Monday.

China's official manufacturing purchasing managers' index (PMI) released by the National Bureau of Statistics rose to an 11-month high of 50.9 in March, above the 50-point level that indicates growth on the month, but below a Reuters poll consensus forecast of 52.0.

A separate survey by HSBC showed its final PMI climbing to 51.6 last month, roughly in line with a flash reading of 51.7 and up from February's 50.4.

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"Growth momentum has been stabilizing, but headwinds remain," Liu Li Gang and Zhou Hao, economists at ANZ, said in a note to clients. "The current economic rebound remains fragile, and could falter with tightened monetary policy conditions."

The twin PMI surveys suggest the speed of revival in the world's No. 2 economy may not be as brisk as some think, as unsteady foreign demand for Chinese exports remained a constraint.

Most analysts expect China's economy to enjoy a steady but gentle recovery this year, driven internally by infrastructure investment and household consumption, after growth struck 13-year lows in 2012 due to crumbling demand for Chinese exports.

Similar trends were evident elsewhere in North Asia. The HSBC/Markit survey of purchasing managers showed manufacturing activity in South Korea at its strongest rate in a year as new export orders picked up, suggesting beginnings of a recovery.

A Markit/JMMA survey for Japan, released on Friday, had shown manufacturing activity grew there for the first time in 10 months, in a sign that the economy was gaining momentum as a weaker yen was helping exporters.

The story in Sought Asia was more gloomy, with cooling domestic and foreign demand resulting in India's manufacturing sector expanding at its slowest pace since November 2011. The HSBC manufacturing PMI for India fell to 52.0 in March from 54.2 in February, marking the biggest month-on-month drop since Sept. 11.

The strength and extent of China's recovery hinges on when the central bank tightens monetary policy after loosening policy last year and increasing credit supply to induce an economic rebound.

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Qu Hongbin, HSBC's chief China economist, said while China's resilient local demand would support its economy in coming months, domestic growth is not surging, not with the HSBC PMI showing factory inflation fell in March for the first time in six months.

"Beijing policy makers should keep a relatively accommodative policy stance in place," Qu said.

The HSBC PMI showed factories struggling with stubbornly sluggish export orders, weakness that was offset by firmer domestic demand that a drove a big rise in new orders.

The official PMI was more upbeat. It showed new orders and new export orders scaling 11-month peaks, pushing factory output to its highest in 10 months.

Manufacturers of cars, electronics, machinery and equipment saw business improve while non-ferrous metal smelters and petroleum processing and coking activity slowed, the official PMI found.

The official and HSBC PMI surveys on China often do not move in tandem due to their different sampling methods. The official PMI favours big state factories while the HSBC PMI favours smaller private manufacturers.

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Concerns that China's economic policy may be less accommodative this year were heightened over the weekend when a host of Chinese cities, including Beijing and Shanghai, said they would enforce plans to cool property prices.

The property market accounted for 17 per cent of China's economy in 2011 and while the country's record home prices are a social problem, analysts worry a heavy-handed approach to calming prices would risk scuppering the economic recovery.

Ting Lu, an economist at Bank of America-Merrill Lynch, said China's renewed push to enact property controls come as Beijing reins in wasteful government spending and lending outside traditional financing channels, and as the debt crisis worsens in Europe, a key market for China's exports.

"We cut year-on-year quarterly gross domestic product growth to 7.9 per cent and 8.1 per cent for the first and second quarters respectively," Lu wrote in a note to clients. The bank had previously forecast growth of 8.3 per cent in both quarters.

However, Lu said he expects China's central bank to leave rates unchanged this year as the country's economic recovery remains fragile and inflation pressures muted.

The rebound in China's PMIs in March comes after a choppy start to the year.

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The official PMI in February fell to within a whisker of the 50-point mark that separates accelerating from slowing growth in China's giant factory sector. But investors mostly saw February's weak reading as a consequence of the Lunar New Year, as many Chinese factories closed for at least two weeks.

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