HONG KONG – A closely-watched official economic survey released Tuesday has delivered an unexpected bright spot for China’s manufacturing sector, revealing that factory activity accelerated its expansion in June, fueled by strong global demand for artificial intelligence-related hardware that has pushed export volumes higher.
Data published by China’s National Bureau of Statistics (NBS) shows the official manufacturing Purchasing Managers’ Index (PMI) – a key benchmark for measuring manufacturing sector health – rose to 50.2 in June, up from a flat 50 reading recorded in May. This outcome outpaced the consensus forecasts from a survey of economists, defying widespread market concerns that China’s post-pandemic economic recovery was losing traction.
The PMI operates on a 0-100 scale, where any reading above the 50 threshold signals the sector is expanding, while a figure below 50 marks contraction. Breakdown of the survey’s sub-indexes offers further evidence of the sector’s improved performance: the new orders sub-index jumped to 51.2 in June, climbing from 49.9 in May, while the production sub-index also edged up to 51.4 from May’s 51.2 reading.
In an official statement accompanying the data release, NBS chief statistician Huo Lihui noted that the June PMI results confirm a gradual warming of China’s overall economic climate. However, independent analysts have struck a more cautious tone, pointing out that the current growth rebound remains heavily concentrated in a narrow range of sectors.
“China’s economy has regained some momentum lately. But this remains heavily dependent on exports and AI-related tech,” Julian Evans-Pritchard, head of China economics at global research firm Capital Economics, wrote in a client note published Tuesday. “External demand remains the main engine of growth for China’s manufacturing sector.”
Economists have repeatedly flagged persistent weaknesses in domestic demand, rooted in a multi-year downturn in China’s key property sector that has left consumers more cautious about discretionary spending. Many argue that the current growth model driven by exports and AI investment is unbalanced, and additional policy intervention will be needed to put the recovery on a more sustainable footing.
Lynn Song, chief economist for Greater China at ING Bank, emphasized that further targeted policy support from Beijing this year to stimulate domestic consumption and private investment would deliver meaningful benefits. Such measures, Song noted, could help China avoid the risks of relying on an increasingly lopsided growth pattern.
Chinese policymakers have set a full-year economic growth target of 4.5% to 5% for 2024. At present, most economists project the country is on track to meet this goal, supported in large part by the ongoing surge in AI-related manufacturing exports that is propping up overall factory activity.