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Activity in China’s manufacturing sector showed a slight uptick in August, despite remaining in contraction for the fifth straight month. The improvement was supported by milder weather disruptions and increased government efforts to curb aggressive competition.
The manufacturing Purchasing Managers’ Index (PMI) registered at 49.4 last month, slightly higher than July’s 49.3, according to recent figures from the National Bureau of Statistics. In comparison, June’s PMI was 49.7, May’s was 49.5, and April’s was 49.0. A reading below 50 signals contraction in the sector.
The PMI dipped into contraction territory in April amid rising China-U.S. trade tensions.
Production continued to grow for the fourth consecutive month in August, rising to 50.8 from 50.5 the previous month. “This indicates that manufacturing output has gained momentum,” stated Zhao Qinghe, a senior statistician at the national statistics bureau.
Weather conditions—particularly high temperatures and heavy rainfall—hampered production in July, dragging the PMI to its lowest point since April. However, those weather-related issues eased last month, while the government stepped up its campaign against “involution,” a term referring to destructive hyper-competition that results in diminishing returns.
This campaign has influenced market expectations and led to rising prices for commodities like coal and steel, according to Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.
Wang explained that these dynamics are mainly responsible for the increases in raw material purchase prices and factory gate prices. Both rose for the third month in a row, reaching 53.3 and 49.1 respectively—up from 51.5 and 48.3, based on the latest data.
Zhang Liqun, a special analyst at the China Federation of Logistics and Purchasing, emphasized that China should intensify its counter-cyclical fiscal policies and increase investments in public goods and services, as the PMI has now been below the boom-bust threshold for five consecutive months.
Wen Tao, an analyst at the China Logistics Information Center, believes that a combination of positive factors will help propel the economy forward. He predicts steady recovery, with manufacturing demand stabilizing and showing early signs of improvement. Production is gradually expanding, raw material prices are creeping higher, and product prices are stabilizing.
The non-manufacturing PMI, which covers construction and services sectors, edged up to 50.3 from 50.1 in July, marking an eighth-month low of 50.1. The data also showed the services PMI increased to 50.5 from 50, the highest point so far this year, while the construction PMI declined to 49.1 from 50.6, primarily due to adverse weather conditions.
The composite PMI, which combines manufacturing and non-manufacturing indices, rose to 50.5 from 50.2, indicating a quickening pace in overall production and business activity.
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