China’s factory activity rebounds in June as US trade tensions ease

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Factory activity in China edged upwards in June but stayed in contractionary territory for a third straight month, as the country battles soft demand and the effects of a trade war with the United States.

China’s official purchasing managers’ index (PMI) – a gauge of manufacturing activity – rose to 49.7 in June from 49.5 in May and 49.0 in April, the National Bureau of Statistics announced on Monday. Scores above 50 indicate growth in manufacturing while readings under 50 suggest a contraction.

The improved results came after Beijing and Washington took steps to de-escalate their unprecedented tariff war in mid-May, with analysts noting that China’s vast export sector appeared to have regained some momentum.

The new orders sub-index rose to 50.2 in June from 49.8 in May, “indicating that manufacturing market demand has improved”, the bureau said. A sub-index for new export orders rose to 47.7 from 47.5 the previous month.

“The economic momentum is stable due to strong exports. High-frequency data suggests that exports may have strengthened in recent weeks,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

Zhang added that Beijing was likely to hold off on implementing more supportive monetary policy changes due to the uptick.

“The policymakers will likely wait and monitor the development of the trade war,” he said, noting that a meeting of China’s Politburo scheduled for July would shed further light on how the country’s leaders are feeling about the state of the economy.