Container ships dock to load and unload containers at Qianwan Container Terminal of Qingdao Port in Qingdao, China, on August 29, 2024.
Costfoto | Nurphoto | Getty Images
China’s factory activity grew modestly among smaller manufacturers last month as export orders offset weakening domestic consumption, according to a private survey.
The Caixin/S&P Global manufacturing PMI came in at 50.4 in August, according to data released Monday, beating the median estimate of 50.0 in a Reuters poll. The latest figure also reflects a rebound from the contractionary level of 49.8 in July.
The private gauge, which focuses on smaller and export-oriented companies, came in contrast with the broader official PMI data released Saturday, which showed the country’s manufacturing activity extended declines to a six-month low at 49.1.
“The divergence is about the better export orders [as] global demand is relatively resilient compared to China’s domestic demand,” Gary Ng, APAC economist at Natixis, told CNBC’s “Squawk Box Asia” Monday morning. But with geopolitical risks on the rise, Ng noted, “who knows how long it will last.”
China’s economy has been rather resilient on the external front, Ng explained, adding that thanks to its state-led nature, China’s economy benefits from the resources that the government is able to mobilize.
But the question comes down to the willingness of the government to “actually support this short-term growth,” he said. While leadership has signaled support for long-term goals, Ng said household sentiment needs to be improved in the short run.
China’s economy has struggled to regain its growth momentum in the face of weakening consumption, property market woes and rising geopolitical risks.
It will be “challenging” for China to reach its 5% GDP growth target, Ng said, adding somewhere near 5% would be more likely.
The Caixin PMI reading, compiled based on responses to questionnaires sent to purchasing executives, has historically been one of the earliest available monthly readings to gauge the health of the country’s economy.
The private manufacturing index surged to an all-time high of 51.80 in June, before nosediving below the 50 threshold in July. A reading above 50 indicates expansion in manufacturing output, while a figure below that suggests a contraction.