March saw growth in China’s massive manufacturing sector following five months of contraction, which is consistent with indications that the economy is stabilizing as a result of the stimulus measures implemented recently.

On Sunday, the National Bureau of Statistics announced that an official measure of China’s industrial activity had risen slightly to 50.8 from 49.1 in February. Economists surveyed by The Wall Street Journal had predicted a reading of 50. At the 50-point mark, growth and contraction are differentiated.

The world’s second-largest economy got off to a strong start this year, with exports exceeding expectations and industrial earnings returning to growth, according to a bundle of data for the January-February period, which was followed by Sunday’s optimistic reading.

Economists generally agree that the Chinese government still has to provide further policy support in order to achieve the rather ambitious growth target of about 5% for the year, even though the recent string of positive data will help alleviate some of the immediate pressure on Chinese officials. Deflationary pressures are expected to continue as a protracted property downturn shows little signs of bottoming out.

Country Garden Holdings, a distressed real estate company, made the surprising news on Thursday that it will miss the deadline for reporting annual results and needs more time to analyze its financial status. This is the latest indicator of concern in the real estate sector.

China Vanke, headquartered in Shenzhen, is another market leader; yet, its net profit fell 46% in 2017—the steepest decline since the company went public in 1991. According to the developer’s Thursday stock exchange statement, it will take some time for these projects to be digested because some investment judgments were overly optimistic during the period of excessive scale expansion.

Expectations are high that fiscal stimulus will play a pivotal role in boosting demand this year, as monetary policy faces constraints due to poor borrowing demand, worries about the earnings of squeezed banks, and a weak currency. Economists are pessimistic about the likelihood of interest rate cuts or reductions to banks’ necessary reserves happening soon due to uncertainties on whether the U.S. Federal Reserve will drop interest rates. This is in spite of recent remarks by China’s central bank that hint to additional monetary easing.

The recent monetary policy loosening has caused China’s officials to worry that too much money is sitting in the banking system rather than the actual economy. Premier Li Qiang issued a warning earlier this month about the need to have a valid rationale for the circulation of currency in the financial system.

The release of comments made by Chinese leader Xi Jinping months ago has stoked speculation that the country’s policymakers are considering a dramatic increase in liquidity. In October, Xi addressed a gathering of financial regulators and urged the central bank to increase the trading of treasury bonds as part of its open-market operations and broaden the scope of its monetary policy instruments.

On the other hand, most economists have dismissed the possibility of such a program due to the limitations and restrictions of further monetary easing. People in China think the government won’t engage in “quantitative easing” like the US does.

Economists from Morgan Stanley informed clients that during the same address, Beijing made hawkish remarks on the need to tighten control over money and credit supply in order to deleverage, which they interpreted as a sign of their continued preference for austerity measures.

For the last twenty years, the People’s Bank of China has mostly avoided purchasing treasury bonds in the secondary markets, as it is forbidden by law to do so in the main market.

According to UBS economist Wang Tao, who spoke to clients on Thursday, Xi seems to be refraining from strong stimulus or quantitative easing and instead urging the central bank to broaden its choices for open-market operations. This, in turn, should provide the bank more flexibility.

Wang stated that the People’s Bank of China has enough of space to use conventional methods to loosen monetary policy, suggesting that the bank will not resort to unconventional policy instruments.

Anyway, the economy is showing indications of a small recovery, so Beijing might not need to intervene as much in the near future.

The production subindex rebounded to expansion in March, finishing at 52.2 from 49.8 in February, according to the factory-sector data released on Sunday. Manufacturers’ appetite for hiring additional people strengthened as the employment gauge jumped to 48.1 from 47.5 in February.

Total new orders increased to 53 from 49 in February, while new export orders climbed to 51.3 from 46.3, both of which are over the 50 mark and indicate increasing worldwide demand for Chinese goods, which hasn’t happened in a year.

The separate announcement came from China’s statistics department on Sunday, and it covered both services and construction activity in its nonmanufacturing PMI, which increased to 53 in March from 51.4 in February. Both the construction subindex (56.2 vs. 53.5 in February) and the subindex tracking services activity (52.4 vs. 51.0) saw increases from February.

Last week, China announced that compared to the same period last year, outbound shipments increased by 7.1% in January and February. Despite the encouraging numbers, Chinese officials have been sounding the alarm about the extremely harsh conditions that their country’s foreign trade is still facing this year. They point to the increasing likelihood of protectionism against manufactured goods, particularly electric vehicles made in China, which is one of the most promising export industries for the country.

Beijing has been investing heavily in China’s massive manufacturing sector in a bid to diversify the economy’s sources of income away from real estate and infrastructure projects and toward the development of high-tech industries like renewable energy and electric automobiles. As a result, concerns about Western governments considering heavy taxes due to overproduction of these products have increased.

The policy combination that Li advocated at China’s annual parliamentary session in early March—an emphasis on technical innovation and enhancements to the industrial sector—is seen by economists as likely to intensify worries about overcapacity.

According to a note from analysts at the New York-based Rhodium Group, the Chinese government has recognized the concerns, but their solutions will likely revolve around retiring outdated capacity and allowing the least competitive companies to close their doors. On the other hand, they will continue to support capacity expansion, innovation, and exports in other areas.