China manufacturing activity rebounds in August: Caixin

Activity in China’s manufacturing sector rebounded to a five-month high in August, data showed on Monday, as stimulus from Beijing helped to offset some of the effects of an economic slowdown and the trade war with the US.

The latest Caixin China General Manufacturing PMI index hit 50.4 during the month, compared to 49.9 in July. That is the highest reading for the index since March, as well as the first time in three months that it has risen above the 50 mark which separate expansion and contraction in the country’s manufacturing industry. The August reading was also higher than the figure of 49.8 as forecast by economists polled by Reuters.

Analysts said that the recovery had been driven partly by an improvement in domestic demand, prompting manufacturers to raise their output, which has been helped by recent stimulus measures undertaken by authorities, such as on infrastructure spending.

However, the index showed that the outlook for Chinese manufacturers toward the coming 12 months was close to its lowest since the Caixin series began. Meanwhile, manufacturers’ export orders fell to their weakest this year amid fears over the impact of trade tensions between the US and China, as well as a cooling global economy. 

“China’s economy showed signs of a short-term recovery, but downward pressure remains a long-term problem. Amid unstable Sino-American relations, China needs to step up countercyclical policies,” said Dr Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group.

August marked a sharp upturn in tensions between the world’s top two economies, while new US tariffs on billions of dollars of Chinese goods came into force at the start of September.

Julian Evans-Pritchard, an economist at Capital Economics, said that Beijing was likely to unveil further stimulus measures over the coming months.

“Clouds are still hanging over the outlook – global demand looks set to weaken further and a long-overdue pull-back in property construction is getting under way. The fiscal support currently in the pipeline is unlikely to fully offset these headwinds and we think authorities will have little choice but to roll out further policy easing measures in the coming months,” he added.

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