China’s August factory activity picks up as demand improves, PMI shows

China's manufacturing sector experienced a quicker expansion in August, as indicated by a private-sector survey. The RatingDog China General Manufacturing Purchasing Managers' Index (PMI) increased to 51.5 from 50.9 in July, remaining above the 50-point threshold that signifies growth. Analysts had projected a lower figure. The survey revealed that output surged at the quickest pace in three months, fueled by heightened demand and capacity growth.

New orders also rose more rapidly due to the largest increase in new export business in six months. Employment remained stable after gains in June and July, but the uptick in demand led to the greatest backlog of work since March. Inventory levels of finished goods expanded at the fastest rate since September 2025, while firms boosted purchasing activity after cutting back in July.

Input cost inflation saw a slight rise from the previous month, yet S&P Global reported that cost pressures remained modest. Manufacturers reduced output prices for the first time this year, attributing it to intense competition and promotional discounts. The growth of China's economy slowed to 4.3% in the second quarter, slower than the 5.0% increase in the first quarter and below expectations.

Despite domestic demand weakening, external uncertainties, including trade tensions and geopolitical risks, continue to cast doubts on the outlook, putting pressure on demand. Currently, manufacturers remain optimistic about production over the next year, though overall confidence dropped to its lowest level since January, as reported by the survey.