China Factory Activity Returns to Growth in September as AI Boom Supports Industry

Post by : Saif

China’s factory activity returned to growth in September as improved weather conditions helped factories resume operations and strong global demand linked to artificial intelligence supported industrial production.

The official manufacturing Purchasing Managers’ Index rose to 50.1 in September from 49.8 in August, according to the National Bureau of Statistics. The reading moved above the 50-point level that separates expansion from contraction, ending two consecutive months of decline.

Private Factory Survey Also Shows Growth

A separate private survey showed an even stronger improvement in manufacturing activity.

The RatingDog manufacturing PMI rose to 52.1 in September from 51.5 in August, reaching its highest level in five months.

The official survey showed new orders at 50.5, while the production sub-index reached 51.7. The figures suggest factory output and new demand improved during the month.

AI-related demand has become an important source of support for China’s industrial sector as investment in technology and advanced manufacturing continues.

Economic Recovery Remains Uneven

Despite the improvement in factory activity, China's broader economic recovery remains uneven.

Weak household consumption and investment continue to weigh on growth, while the prolonged property downturn has reduced confidence among businesses and consumers.

China’s economy grew 4.3% in the second quarter, its slowest pace in more than three years. Beijing has set a full-year growth target of between 4.5% and 5%.

Economists have said additional policy support may be needed to strengthen areas of the economy that are not benefiting as strongly from industrial and export growth.

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China Increases Economic Support

Beijing has stepped up measures to support economic activity.

On Tuesday, Chinese authorities announced measures designed to direct cheaper credit toward sectors including infrastructure and technology. Additional support was also announced for home buyers.

The non-manufacturing PMI, which covers services and construction, also improved. It rose to 50.2 in September from 49.0 in August.

Economists say government support is increasingly focused on strategic areas such as artificial intelligence, technology self-reliance and industrial upgrading.

Exports Remain Important for Growth

China continues to rely heavily on exports and industrial production to support economic growth.

The country’s goods trade surplus is expected to exceed $1 trillion for a second consecutive year. Strong overseas demand has helped offset weaker domestic consumption and the prolonged property slowdown.

However, geopolitical uncertainty and trade tensions remain risks for Chinese manufacturers. Products ranging from advanced electronics to household goods are facing greater scrutiny in overseas markets.

US-China Trade Tensions Remain a Risk

China and the United States agreed on Monday to pursue tariff reductions covering $60 billion worth of goods imported from each country.

The planned changes cover products including US corn, cosmetics, Chinese toys and household appliances. However, some important products were excluded from the arrangement, including non-seed soybeans, which are among the biggest US agricultural exports to China.

The trade discussions could affect China’s export outlook as manufacturers continue to depend on overseas demand.

AI and Technology Support Industrial Activity

The September data highlights a growing difference between China’s stronger technology and industrial sectors and weaker parts of the domestic economy.

Investment is continuing to flow into artificial intelligence, advanced technology and industrial production, while property and consumer demand remain under pressure.

For policymakers, the challenge is to maintain industrial momentum while strengthening household consumption and addressing weakness in the property sector. The September PMI improvement provides evidence of better factory conditions, but the broader economy still faces several challenges before a more balanced recovery can be established.

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