Key facts
- China's factory activity returned to expansion in June, with the official manufacturing PMI rising to 50.3.
- The non-manufacturing PMI improved to 50.2 and the composite PMI reached 50.6 in June.
- Strong demand for high-tech exports, particularly semiconductors, is driving manufacturing growth.
- Exports of automated data processing equipment jumped 60% year-on-year in May.
- Domestic demand remains weak, with retail sales falling and new home prices declining.
- China's central bank has reportedly instructed some banks to increase lending.
China's factory activity returned to expansion in June, with the official manufacturing purchasing managers' index (PMI) rising to 50.3 from 50.0 in May, according to a survey by the National Bureau of Statistics. This growth was primarily driven by strong exports of high-tech goods, such as semiconductors, linked to the global AI boom. The non-manufacturing PMI also improved to 50.2, and the composite PMI reached 50.6.
Despite the positive manufacturing figures, broader economic challenges persist. Shipments of other goods, like furniture, saw only modest growth, while domestic demand remained subdued, evidenced by a fall in retail sales for May and accelerating declines in new home prices. China's economy is thus reliant on global demand to absorb its industrial output.
Exporters accelerated shipments to the U.S. in June ahead of new tariffs set to take effect from late July. However, signs suggest that inventory build-ups driven by Middle East-related price increases are fading, and overseas buyers are reducing stock levels. In an effort to stimulate the economy, China's central bank has reportedly instructed some commercial banks to increase lending this month.