Factory output sees strong growth in Aug in China

China's manufacturing sector saw its strongest expansion in more than nine years in August as production and market demand firmed up in the aftermath of the COVID-19 epidemic, a private survey said on Tuesday.

The Caixin China General Manufacturing Purchasing Managers' Index came in at 53.1 in August, the highest level since January 2011 and up from 52.8 a month earlier, media group Caixin said in a report. The reading marked the fourth month in a row for the index to rise within the expansionary territory, indicating that the manufacturing sector has recovered at a continuously quicker pace. A reading above 50 indicates expansion, while one below that reflects contraction.

"Manufacturing demand and supply were both robust, while overseas demand has started to pick up," said Wang Zhe, a senior economist at Caixin Insight Group.

In August, the subindexes for output and total new orders hit their highest levels since January 2011, while the gauge for new export orders entered the expansionary territory for the first time this year, mainly due to a slowing spread of the pandemic overseas, the report said.

In anticipation of a sustainable recovery in demand, manufacturers increased their inventories of finished items for the first time since April, though slightly.

Some companies have even started to increase recruitment to meet rising market demand last month, pushing the sub-gauge of employment to the highest level this year, albeit still within the contraction territory.

"Companies' future output expectations remained strong, reflecting a positive outlook for the manufacturing sector for the year ahead," Wang said.

Analysts said the country's manufacturing sector is set to continue recovering in the coming months as the epidemic situation gradually stabilizes domestically, the supportive macro policy continues, and more overseas economies resume business activity.

But the elevated uncertainties such as the global pandemic situation and the China-US trade row could limit the strength of recovery, while more efforts are needed to help small and medium-sized manufacturers, especially those in the middle and western regions of the country, they said.