Chinese manufacturing sector continues to recover in February

Expansion in China's manufacturing activity gained momentum in February. China's official and private Caxin manufacturing PMIs improved in February as producers revved up output to meet an increase in new orders. China’s official manufacturing PMI monitors business activity at large and state-run factories, contrasting with a private report from Caixin that looks at small- and medium-sized enterprises.

China’s official manufacturing PMI came in at 51.6 in February, up from 51.3 in the previous month, and higher than market expectations at 51.2. This is the 7th consecutive month that China’s official manufacturing PMI stayed within the expansionary territory, suggesting that the industrial activities remain stable.

The Caixin China General Manufacturing Purchasing Managers' Index (PMI) rose to 51.7 last month from 51.0 in January. The February reading was the second-strongest in more than four years (after that recorded in July 2014).

"Given the stability of economic activities, we believe that monetary policy will gradually tighten at the margin. The PBoC could further hike the inter-bank market interest rates in the future. We think that another 10bps increase in 7-day reverse repo is very likely this month." said Commerzbank in a report.