Key Takeaways
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- RatingDog/S&P Global manufacturing PMI rose to 50.5 in August from 49.5 in July — the first expansion in five months.
- Gains were driven by new domestic orders and promotional efforts; export declines moderated, but orders may have been pulled forward.
- Hiring remains weak, with manufacturers cutting staff for a fifth straight month, signaling cautious sentiment despite higher capacity pressures.
- Divergence from official PMI (49.4, still contractionary) highlights uneven momentum between smaller private firms and large state-owned enterprises.
- Housing remains a drag: new home sales by China’s top 100 developers fell 17.6% YoY in August, the sixth consecutive monthly decline.
What Happened?
A private PMI survey showed Chinese manufacturing expanding modestly in August, with upbeat sentiment about the year ahead. Firms cited stronger domestic demand and sales campaigns, though overseas demand remained fragile. The improvement, however, has not translated into jobs, as manufacturers continued cutting staff. Meanwhile, official PMI data contradicted the rebound, showing continued contraction.
Why It Matters
- Growth signal: The rebound suggests some stabilization in industry, but fragility in exports and housing points to broader economic weakness.
- Labor caution: Persistent job cuts highlight limited confidence among manufacturers, undermining household income growth and domestic rebalancing.
- Policy implications: Divergent PMIs complicate Beijing’s efforts to calibrate fiscal and industrial support. With fiscal spending slowing and overcapacity policies tightening, momentum could fade quickly.
- Market lens: Investors should treat the rebound as a short-term reprieve rather than confirmation of sustained recovery. Equities and commodities sensitive to Chinese demand may see temporary relief, but risks from housing weakness and slower stimulus remain elevated.
What’s Next?
Watch for upcoming export data (to confirm whether orders stabilize beyond short-lived promotional boosts), further fiscal policy announcements, and signs of easing measures to support housing. Sustained stabilization likely requires stronger domestic demand or more aggressive policy intervention. Divergence between official and private PMIs will remain a key barometer for investor confidence in China’s recovery trajectory.
