Domestic demand expected to offset pressure of weaker exports, uncertainty

China's industrial rebound is picking up pace on the back of a steady recovery in domestic production and demand, despite challenges and external uncertainties, experts said.

Such a positive trend is expected to continue as policy support restores market confidence and encouraging signs indicate enterprises' heightened expectations, they added.

The comments came after China's industrial output - a gauge of activity in manufacturing, mining and utilities - grew 3.9 percent in March from a year earlier, figures released by the National Bureau of Statistics showed on Tuesday.

That was 1.5 percentage points faster than the January-February performance, indicating that the recovery of China's industrial economy is picking up pace.

Fu Linghui, an NBS spokesman, said on Tuesday that positive changes are emerging in industrial production, with most sectors maintaining growth.

Fu said that among the 41 major industrial sectors, 23 maintained year-on-year growth in the first quarter.

Equipment manufacturing has played a clear supporting role for the industrial economy, contributing to 42.5 percent of the growth in terms of overall industrial output, he added.

Specifically, the equipment manufacturing sector's growth rate hit 4.3 percent year-on-year in the first quarter, 1.3 percentage points higher than that of overall industrial output.

Meanwhile, raw material production also saw rapid growth, and small and medium-sized enterprises recorded a marked improvement in performance, Fu said.

Zhou Maohua, a macroeconomic analyst at China Everbright Bank, said industrial output continued to recover last month, with a significant acceleration in growth rate, mainly due to the steady recovery of domestic economic activity and a rebound in market demand.

"The combination of relief and assistance policies effectively reduced production costs and financial pressure in the manufacturing sector, smoothed out the industrial and supply chains, improved corporate confidence and drove an increase in output," Zhou said.

In March, retail sales of new energy vehicles in China expanded 21.9 percent year-on-year to 543,000 units, said the China Passenger Car Association, thus significantly driving manufacturing output.

Ye Yindan, a researcher at the BOC Research Institute, said the March industrial data roughly met market expectations. Going forward, the industrial economy will maintain a good recovery momentum, with the sustained rebound in domestic demand expected to offset the pressure of falling external demand and becoming the main force driving production, Ye said.

Meanwhile, the government is expected to maintain policy support, which will continuously restore the confidence of SMEs, and improve market expectations, Ye said.

"Industrial output in the second quarter is expected to increase by around 9 percent year-on-year, given the low comparison base of last year," Ye added.

Efforts are needed to adjust policy priorities in a timely fashion based on economic recovery, such as supporting the development of newly established enterprises through tax incentives and financial support, and encouraging State-owned enterprises to postpone the collection of rent from newly established enterprises, Ye said.

Yang Yuanqing, chairman and CEO of Lenovo Group Ltd, the world's largest personal computer maker, said China's efforts to support the private sector and implement favorable industrial and financial policies are giving companies more confidence.

"We aim to grow our personal computer business at a growth rate that outpaces the overall industry growth and maintain industry-leading profitability in the new fiscal year," Yang said.