China’s manufacturing sector continued to grow in March 2026, even as it faced steep increases in input costs and longer delivery times from suppliers.
The sector showed positive movement in production, new orders, and employment, though at a somewhat slower pace than February’s performance.
The Purchasing Managers’ Index registered 50.8 in March, a decrease from February’s 52.1 reading, which indicates a slower overall expansion, RatingDog said in its latest report.
Chinese manufacturers reported higher new orders in March, which they attributed to stronger market demand, new customer acquisitions, business expansion efforts, promotions, and competitive pricing.
Export orders also increased, albeit more slowly than in February.
Meanwhile, production increased for the fourth straight month, with growth primarily coming from the consumer and intermediate goods sectors. Investment goods production remained relatively stable.
As production growth slowed, backlogs of work increased at a faster rate, with manufacturers citing higher customer demand, capacity limitations and staffing changes as contributing factors. In response to this, Chinese producers increased their workforce for the third consecutive month – the longest period of job creation since mid-2021.
Manufacturers also expanded purchasing activities for the third straight month, though at a slower pace than in February.
Supply chain pressures emerged in March, with delivery times becoming longer for the first time in five months.
The delays were the most severe since December 2022, with companies pointing to supply chain disruptions, rising and volatile input prices, and supplier capacity constraints as key causes.
Inventory levels showed mixed trends, with input stocks rising slightly while finished goods inventories decreased marginally as companies fulfilled orders from existing stock.
A notable development was the sharp acceleration in price inflation. Both input and output prices increased at the fastest rates in four years, exceeding long-term averages.
Business optimism retreated somewhat from February’s peak. Still, confidence remained stronger than in December and January, supported by expectations of firmer customer demand, investments in production capacity, new product developments, efficiency improvements, and supportive government policies.
According to RatingDog founder Yao Yu, China’s manufacturing sector continued its moderate expansion in March, though it faces an increasingly complex economic environment.
“Domestically, the 2026 Government Work Report set a GDP growth target within a flexible range of 4.5% to 5%, largely in line with market expectations. This reflects a general policy stance of ‘seeking progress while maintaining stability, which is expected to provide moderate underpinning for manufacturing activity, albeit without implying significant stimulus,” Yu said.
Yu also acknowledged ongoing geopolitical tensions keeping oil prices high and creating volatility in raw materials markets. These external factors are driving up input costs for manufacturers, creating inflationary pressure that will likely continue to challenge production costs into April.
The analysis suggests manufacturers face a balancing act between maintaining growth momentum and managing increasing cost pressures in the months ahead.
