China's factory activity rebounds to highest level in nearly a decade
By Guan Xin
01:36

The Caixin/Markit manufacturing Purchasing Managers' Index (PMI) came in at 52.8 for July, marking its third straight month of expansion. It was also the fastest pace of growth in nearly a decade.

The results beat the expectation of 51.3, reinforcing views that China's economy is in recovery trajectory.

Looking at sub-indices, output and new orders both rose at their fastest rates in nine-and-a-half years, supporting the higher PMI figure. Many companies cited the rise in greater client demand amidst an ongoing recovery in market conditions following the COVID-19 outbreak.

However, on the downside, the gauge for new export orders remained in contractionary territory for the seventh consecutive month in July. That was due to the impact of the overseas pandemic.

Analysts say the uneven recovery pace shows the rebound was mainly driven by policy stimulus. That's because most of the strength in new orders was due to policy-driven domestic demand.

Employment also remained weak. The sub-index for employment stayed in negative territory for the seventh consecutive month, as some companies laid-off workers to reduce costs.

The report also raised concerns about an uptick in inflation pressure, as input costs and output prices rose faster.

Looking ahead, the report says companies were generally confident that output would be higher than current levels in 12 months. The growth forecast was underpinned by expectations that economic activity and client demand would continue to recover from the pandemic.