BEIJING, March 30 (Reuters) - China's factory activity likely expanded in March - snapping a two-month contraction - amid strong momentum in goods exports, although supply chain shocks from the Iran war cloud the outlook.
A Reuters poll of 28 economists projected that the official manufacturing purchasing managers' index (PMI) would rise to 50.1 from 49.0 in February, just above the 50-mark separating expansion from contraction.
The data, based on the National Bureau of Statistics' survey of companies,
will be released on Tuesday.
The gauge was in contraction for most of 2025 and the first two months of 2026 as weak consumption triggered profit-eroding price wars at home, while tensions with trading partners dampened confidence.
China's goods exports, on the other hand, remained resilient in 2025 despite the havoc wreaked by U.S. tariffs, and boomed in the first two months of 2026, serving as a vital growth driver.
The improvement in the headline PMI reading, however small, would come as a hopeful sign to policymakers, who are seeking steady economic growth against a backdrop of rising external uncertainties.
The war in the Middle East, which erupted at the end of February with U.S.-Israeli attacks on Iran, has upended global supply chains and triggered an energy crisis as Iran restricted shipments through the crucial Strait of Hormuz. The disruptions could squeeze Chinese manufacturers' profit margins as costs of logistics and raw materials go up.
Analysts polled by Reuters forecast the private-sector RatingDog Manufacturing PMI, due on Wednesday, to come in at 51.6, down from 52.1 in February.
The PMI will be constrained by the oil shock, which has hit industries such as refineries and petrochemicals, said Xu Tianchen, senior economist at the Economist Intelligence Unit.
To cushion the impact on businesses, the government can help small and medium-sized companies reduce operating costs through cheaper credit and lighter social security inspection, Xu said.
Chinese policymakers announced in early March a softer growth target of 4.5%-5% for the year - after achieving 5% growth in 2025 - allowing more room to address entrenched imbalances between domestic supply and demand.
They have also pledged to increase spending in major infrastructure and public services, and earmarked more government funding for boosting consumption and private investment with a special 100 billion yuan ($14.47 billion) fiscal-financial coordination fund.
($1 = 6.9087 Chinese yuan)
(Reporting by Yukun Zhang and Ryan Woo; Polling by Rahul Trivedi and Renusri K in Bengaluru and Jing Wang in Shanghai)
