China Factory Activity Expected to Rebound in September as Beijing Signals More Support

Post by : Saif

China’s factory activity is expected to return to growth in September after two months of contraction, while policymakers have signalled additional measures to support the slowing economy.

A Reuters poll of 29 economists expects China’s official manufacturing Purchasing Managers’ Index (PMI) to rise to 50.1 in September from 49.8 in August. A reading above 50 indicates expansion, while a figure below 50 points to contraction. The official data is due on Wednesday.

Manufacturing Shows Signs of Recovery

The expected improvement follows disruptions caused by heavy rain and typhoons in some parts of China during August. Advanced manufacturing and exports have remained stronger parts of the economy this year, helping offset weaker domestic demand.

The private RatingDog manufacturing PMI, compiled by S&P Global, is also expected to edge higher to 51.6 in September from 51.5 in August, according to the Reuters poll.

China is expected to release third-quarter economic growth figures and September activity data later this month. Officials have said the economy remains on track to meet its 2026 growth target of 4.5% to 5%.

Beijing Signals More Economic Support

China’s cabinet, led by Premier Li Qiang, said on Monday that the government would strengthen counter-cyclical policy measures to address rising economic pressure.

The State Council called for faster implementation of existing policies and quicker issuance and use of government bonds. It also called for support for investment and consumption, infrastructure development and measures aimed at stabilising the property market.

The government also said it would expand relending facilities for technology innovation, industrial upgrading, agriculture and small businesses. Measures to support employment and household incomes are also being considered.

Read more: UK Factory Orders Grow at Fastest Pace Since 2020, Industry Survey Shows

Domestic Demand Remains a Concern

Despite the expected improvement in factory activity, China's wider economy continues to face pressure from weak domestic demand.

Recent retail sales and investment figures have pointed to slower momentum. Consumers have remained cautious about spending because of uncertain income prospects and concerns about the effect of artificial intelligence on employment. The property sector also remains under pressure.

China’s second-quarter economic growth slowed to 4.3%, while industrial output, retail sales and investment weakened at the beginning of the third quarter.

Exports Continue to Support Growth

Strong exports have provided an important source of support for China’s economy despite weaker domestic demand. Beijing is now looking to combine export strength with additional fiscal and credit measures to support broader economic activity.

China and the United States also agreed this week to pursue lower tariffs on $60 billion of goods traded between the two countries, while extending their trade truce. The agreement covers selected products including US agricultural goods and Chinese consumer products, although the timing and extent of the tariff reductions have not been fully specified.

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