Picking up speed

Factories grow at fastest pace in two years

China’s official Purchasing Managers Index for manufacturing returned to expansionary territory in August, hitting its highest point since November 2014, indicating solid economic recovery.

The PMI in August registered at 50.4, compared with 49.9 in July and 49.7 a year ago, the National Bureau of Statistics said on Thursday.

The index is a leading gauge of manufacturing activity. A reading above 50 indicates expansion in the manufacturing sector while below 50 means contraction.

Zhao Qinghe, senior statistician at the NBS, said that the data indicates recovery in production and demand as well as a further optimized economic structure.

Among the PMI five sub-indexes, the production, new orders and employment subindexes all rose from the previous month.

The production subindex reached a high this year of 52.6, compared with 52.1 in July. The new order subindex rose to 51.3 in August from 50.4 in July.

But Zhao also noted that China’s manufacturing sector still faces pressure from the downturn in exports, as the subindex of new export orders was 49.7 in August, up from 49.0 in July.

According to Zhang Yiping, economist of China Merchants Securities, the recovery in demand is the main factor contributing to the rebound.

“The demand may mostly be a result of consumption upgrades,” Zhang said.

The PMI of the high-tech manufacturing industry was 52.6 and the PMI of the consumer goods manufacturing industry was 51.2 in August.

The official PMI “shows that the growth momentum of the Chinese economy is improving, which will turn weak market confidence around,” said Zhou Hao, a senior economist at Commerzbank.