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China manufacturing rebounds unexpectedly

An unexpected expansion in Chinese manufacturing has provided cause for renewed optimism in the world's second largest economy. Last year China saw its slowest economic growth in a quarter of a century.

China's manufacturing activity unexpectedly expanded in March for the first time in nine months, official figures showed Friday.

The official Purchasing Managers' Index (PMI) hit 50.2 in March, rising above the 50-point threshold that separates growth from contraction. The PMI tracks manufacturing activity in factories and workshops and investors monitor the index closely as the first official indicator of the country's economic health each month.

In February, the PMI was 49.0, which marked the seventh consecutive month of contraction.

The news added to hopes that

downward pressure on the world's second largest economy

could be easing. Recent industrial profit data showed combined earnings rose 4.8 percent in the first two months of the year.

Analysts say the improvement could be linked to a rebound in the property market and an increase in construction activity, bolstering demand for building materials such as cement, glass and steel. A recent recovery in global energy and commodity prices may also have boosted profits.

China's economy grew 6.9 percent last year, its

weakest rate in a quarter of a century.

The government is pressing ahead with structural reforms to battle excess capacity.

Moody's Investor Service cut China's credit rating outlook last month from "stable" to "negative," citing rising government debts, a fall in currency reserves and uncertainty about authorities' capacity to implement reforms.

Watch video 01:21

China troubled by overcapacity

bw/jr (Reuters, AFP)

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