June 23, 2024
China's Factory Activity: Economic Resurgence Amid Property Sector Challenges

China's Factory Activity: Economic Resurgence Amid Property Sector Challenges

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Introduction: The Upturn in China’s Factory Activity

Recent data reveals an upswing in China‘s factory activity, marking the first expansion in six months as of September. This shift hints at a potential stabilization in the world’s second-largest economy, even amidst the looming shadows of a property sector crisis.

Recovery Signals in Manufacturing

The Purchasing Managers’ Index (PMI), a critical tool reflecting the health of the manufacturing sector, experienced an uptick to 50.2 in September, a rise from the previous month’s 49.7. Notably, this increase surpassed the anticipated forecast of 50.0. This metric, derived from a comprehensive survey of major manufacturers, is facilitated by the National Bureau of Statistics. The 50-point level is particularly significant, distinguishing between contraction and expansion in industrial activity.

This rise in PMI joins a series of indicators suggesting a likely rebound in the economic trajectory. The momentum seemed to have taken a downturn after the initial boost at the start of the year, when China’s factory activity began rolling back its stringent COVID-19 protocols. However, August already started showing the green shoots of recovery, with noticeable accelerations in factory output and retail sales growth. Additionally, the previous decline in exports and imports was arrested. The icing on the cake was the astonishing 17.2% leap in industrial profits for August.

Zhou Hao, a lead economist at Guotai Junan International, commented on the data, stating that these positive signs insinuate a gradual foundational stabilization of the economy.

The Non-Manufacturing Sphere

China’s non-manufacturing PMI, which encompasses both services and construction sectors, demonstrated growth as well, recording 51.7 in comparison to August’s 51.0. Combining the metrics from the manufacturing and non-manufacturing sectors, the composite PMI surged to 52.0 from the prior 51.3.

A Spotlight on the Golden Week

As economists eagerly anticipate near-term data, attention is focused on consumer spending during the much-anticipated “Golden Week.” Commencing with the Mid-Autumn Festival, it will stretch till October 6, marking the National Day break. The commencement of Golden Week has been promising, with rail passenger travel hitting the 20 million mark on Friday, establishing a new single-day record. This surge in travel gives credence to the predictions of this being the most popular Golden Week in history.

The Overhanging Property Sector Clouds

Despite the positive economic markers, challenges persist, particularly in the property sector. Policymakers find themselves in the throes of a property sector crisis, with global markets being significantly impacted. There have been various attempts to stabilize the property market, including mortgage rate reductions. Still, the sector remains unstable, as demonstrated by the rapid fall in new home prices in August and the continuous decline in property investment for the past 18 months.

In recent developments, China Evergrande Group, a property giant with liabilities exceeding $300 billion, announced the investigation of its founder on suspicions of “illegal crimes”. The turbulence in the property sector has influenced forecasts, with the Asian Development Bank revising its 2023 economic growth prediction for China to 4.9%.

Future Prospects and Expert Insights

With the government’s growth target set at approximately 5% for the year, analysts believe additional policy support will be imperative. Zhiwei Zhang, chief economist of Pinpoint Asset Management, emphasized the role of fiscal policy and anticipates a more supportive stance, likely to be witnessed next year.


As China’s factory activity shows promising signs of resurgence, the overshadowing property sector crisis remains a concern. The impending months will be crucial and causal if the economy can maintain its new momentum while navigating the tempestuous waters of the property segment.


China’s factory activity experienced its first growth in six months in September, with the Purchasing Managers’ Index (PMI) rising to 50.2, indicating potential economic steadiness. This development is supported by other optimistic indicators, such as augmented factory output and a 17.2% surge in industrial proceeds in August. Despite these positive signs, China faces challenges in its property sector, highlighted by concerns surrounding the China Evergrande Group. As China enjoys positive economic indicators, attention remains on the need for additional policy support to maintain this momentum while addressing property sector issues.

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