Workers are busy producing export-oriented clothes ordered by overseas clients at a garment factory in Suncun town in Wuhu city, East China's Anhui Province on August 29, 2023. From January to April this year, China's overall exports of textiles, clothing and accessories totaled $92.88 billion, according to the General Administration of Customs of China. Photo:cnsphoto

China's factory activity swung into expansion in August, a private sector survey showed on Friday, driven by improved production and demand after a number of stimulus policies kicked in.

According to data released Friday, the China Caixin manufacturing purchasing managers index rose to 51.0 in August, a significant increase from 49.2 in July and back to expansion territory in signs of improving.

The rebound came after the index hovered below the 50 mark, which separates activity expansion from contraction, for just one month in July.

Notably, the increase in supply and demand led to a significant improvement in the employment situation in the manufacturing industry. The August employment index rose into expansion range for the first time in six months and was the highest since April 2010, according to the survey.

Wang Zhe, a senior economist from the Caixin Think Tank, said that China's manufacturing sector improved in August. Aside from sluggish exports, supply, demand, and employment indexes were all in the expansion range, but the problems of insufficient internal demand and weak expectations may continue to be a drag on further increases to the reading.

At present, stabilizing expectations and increasing income levels remain the focus of policy implementation. The internal and external economic environment is becoming more and more complex, and the urgency and necessity of relevant support policies have further increased, Wang said.

This improving trend is also consistent with the official manufacturing PMI released by the National Bureau of Statistics on Thursday. The manufacturing PMI stood at 49.7 in August, 0.4 percentage points higher than that in July. It marks the third consecutive year-on-year increase, although the index still remained in contraction territory.

Spurred by growth-reinforcing signals from the country's top policymakers and a package of stimulus measures gradually being rolled out, it is expected that the index will enter expansion territory in September and maintain momentum until the fourth quarter, analysts told the Global Times.

Chinese policymakers ranging from the State Council and the top economic planner to the Ministry of Commerce and the central bank have launched stimulus measures in quick succession over the past two months to boost consumption and kickstart growth momentum.

On Friday, China's central bank said it will cut the foreign exchange reserve requirement ratio for financial institutions by 2 percentage points from September 15, sending a positive signal to the market, which is conducive to stabilizing yuan exchange rate expectations.

Global Times