China’s factory activity contracts in August despite an uptick in export demand

China's factory activity showed a slight improvement in August, despite export demand remaining strong, as overall manufacturing activity continued to contract, according to the National Bureau of Statistics. The country's official manufacturing purchasing managers' index (PMI) rose marginally to 49.8 in August from 49.2 in July, indicating a contraction.

However, this was better than economists had anticipated. The PMI, which measures monthly surveys of companies, measures expansion on a scale of 0 to 100, with readings above 50 indicating growth and below 50 showing a contraction. Several sub-indexes also returned to expansion in August, including production (50.4), new orders (50.6), and new export orders (50.1).

Huo Lihui, a statistician with the National Bureau of Statistics, stated that the August PMI data reflected an improvement in China's overall economy. China's exports surged nearly 24% in July from the previous year and over 18% in the first seven months of the year, driven by robust demand for high-tech exports such as semiconductors due to the artificial intelligence boom and strong demand for electric vehicles, fueled by higher energy costs due to the Iran war.

Additionally, China has been exporting more to regions like Europe and Southeast Asia, as U.S. tariffs have impacted China-U.S. trade following the return of President Donald Trump to the White House last year. Despite the trade boom, sluggish domestic demand, particularly due to a prolonged slump in the property sector, has put pressure on China's economy.

The Chinese economy expanded at a 4.3% annual pace in the April-June quarter, marking its slowest growth rate in over three years.