China’s factory activity showed signs of improvement in August but remained in contraction for the second consecutive month, according to data released by the National Bureau of Statistics (NBS). The manufacturing purchasing managers’ index (PMI) rose slightly to 49.8, up from 49.2 in July, but stayed below the 50 threshold that separates expansion from contraction. This reading closely matched economists’ expectations.
The PMI, which gauges factory activity through surveys of supply chain managers, reflected a modest rebound driven by an increase in new orders. The new orders subindex climbed to 50.6 in August from 48.5 in July, while new export orders edged up to 50.1 from 49.6. Despite these gains, overall manufacturing output remained subdued amid weak domestic demand and disruptions caused by extreme weather events.
“The overall business climate in manufacturing improved visibly in August, with 16 out of 21 surveyed industries registering month-on-month gains,” said Huo Lihui, an NBS statistician. Huo highlighted that both production and demand exhibited simultaneous growth, sustained by strong performance in high-tech manufacturing and large enterprises.
Economists responded to the data with cautious optimism. Lynn Song, chief economist for Greater China at ING, noted that the slightly stronger-than-expected performance could support a modest recovery in industrial production when official figures are released in the coming weeks. However, Xing Zhaopeng, senior China strategist at ANZ Research, cautioned that service and construction segments remained sluggish, partly due to adverse weather conditions. “The data suggested better activities in August, which will weaken the necessity of stimulus going forward,” Xing said, while also emphasizing the likelihood of targeted policy support.
The manufacturing sector’s continued struggles reflect broader challenges facing China’s economy, which slowed to a 4.3 percent growth rate in the second quarter. Retail sales growth and industrial output both decelerated in July, while fixed-asset investment—including manufacturing and property development—further weakened.
Adding to the pressures, a series of typhoons linked in part to the El Niño weather pattern battered parts of China in August, causing heavy rains, flooding, and disruptions to commercial activities and construction projects. These environmental factors compounded underlying demand weaknesses.
In response, Beijing has pledged to enhance macroeconomic support and accelerate fiscal spending to bolster growth. In August, policymakers expanded eligibility and increased loan caps for smaller businesses under a national interest-subsidy program aimed at easing financing constraints.
Meanwhile, the non-manufacturing PMI, which tracks services and construction activity, remained unchanged at 49 in August, continuing its contraction streak. The official composite PMI, covering both manufacturing and non-manufacturing sectors, edged up slightly to 49.5 from 49.3 in July but still signaled a contracting economy overall.