Private Gauge Shows Expansion in China's Factory Activity

In August, China's private gauge of factory activity experienced a rebound, indicating expansion, thanks to improvements in supply and market demand. According to data released by Caixin Media Co. and S&P Global on Friday, the China Caixin manufacturing purchasing managers index (PMI) rose from 49.2 in July to 51.0 in August.

Recovery After a Short Contraction

After just one month below the 50 mark, which separates expansion from contraction, the index bounced back. Despite the impact of extreme heat on some manufacturers' production, subindexes tracking total new orders and factory output both returned to expansionary territory in August. However, export orders improved but remained below 50, weighing down on Chinese manufacturers' overall performance.

Promising Employment Figures

The employment subindex for the manufacturing sector entered expansionary territory for the first time in six months, reaching the highest level since March 2010. Wang Zhe, a senior economist at Caixin Insight Group, stated that apart from sluggish exports, the gauges for supply, total demand, and employment all showed positive signs.

Government PMI Continues to Improve

China's official manufacturing PMI also reflected this upward trend in August, improving from 49.3 in July to 49.7. However, the government's gauge still remains in contraction territory.

Challenges Ahead

Wang from Caixin Insight Group noted that insufficient domestic demand and a weak economic outlook may create a vicious cycle for a longer period of time. He emphasized the importance of stabilizing expectations and increasing household income as key policy focuses.