China’s manufacturing PMI for March rose by a solid 1.2ppt to 49.7, as compared with market forecast of 49.4. According to the earlier data, the index shows solid seasonality tends to increase in March due to the effects of Chinese New Year. The index rose at an average of 0.9pt from February to March during 2011-2015.

March’s PMI data hints that manufacturing demand is stabilizing, according to ANZ. New export orders and new orders rose 2.8ppt. Actually, new export orders returned to expansionary territory, rising to 50.2. Meanwhile, output index rose to 52.3, whereas factory activities appeared to have warmed up.

Rise in infrastructure spending and rebound in electronic supply chains recently are expected to have driven the rise in PMI, added ANZ. China’s March PMI data implies that the country can attain an economic growth of 6.5% in the first quarter of 2016. Manufacturing PMI for January to March 2016 averaged 49.5. This is similar to the levels seen for the same period in 2015 and previous quarter, which recorded GDP growth of 7% and 6.8% respectively.

Meanwhile, services sector in China remain upbeat that was seen by high non-manufacturing PMI, which rose to 53.8 in March. Momentum of growth has not dropped considerably. However, PBoC’s monetary stance is likely to remain accommodative, according to ANZ.

“Our call remains for it to cut the RRR by 150bps for the rest of the year as deflationary risk remains high. In the near term, however, the central bank will be more inclined to manage market liquidity through unconventional tools and OMO. The next RRR cut will likely be in June”, says ANZ.