China’s Factory Activity Sees First Growth in Six Months

China’s factory activity expanded in September, signaling a significant turnaround for the country’s economy. The latest data revealed that the purchasing managers’ index (PMI) for major manufacturers rose to 50.2 in September, surpassing the crucial 50-point level that separates expansion from contraction.

This positive development adds to recent signs of stabilization in China’s economy, which experienced a slump earlier this year following the lifting of COVID-19 restrictions. As August witnessed preliminary signs of improvement, such as increased factory output, retail sales growth, and narrower declines in exports and imports, the country can now draw hope from the unexpected jump in profits at industrial firms during the same month.

The non-manufacturing PMI, which encompasses service sector activity and construction, also saw a rise in September, suggesting a more comprehensive recovery across various sectors. Furthermore, the composite PMI, which combines both manufacturing and non-manufacturing activity, experienced an increase as well, highlighting the overall resilience of China’s economy.

As the country gears up for the upcoming “Golden Week” public holiday, including the Mid-Autumn Festival and National Day break, analysts anticipate that this period will provide further economic data. This additional information will be crucial for policymakers as they seek to address the ongoing challenges posed by China’s property sector debt crisis.

Recent trends in the property market further underscore the need for stable economic indicators. In August, new home prices fell, and property investment has been in decline for 18 consecutive months. Of particular concern is China Evergrande Group, the world’s most indebted property developer, which is currently facing investigations into suspected “illegal crimes.” The Asian Development Bank has consequently revised its economic growth forecast for China, citing weakness in the property sector as a significant factor.

Looking ahead, analysts believe that more policy support will be necessary to achieve the government’s growth target of approximately 5% for this year. However, it is speculated that fiscal policy changes may be postponed until next year instead of being implemented in the current year.

Despite the challenges and uncertainties, the recent expansion in China’s factory activity offers a glimmer of hope for the country’s economy. It serves as a positive sign that the worst may be behind us, and that China is on its way to a more sustained recovery and future growth.

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