China’s factories post fastest growth in five months after tariff truce

Beijing — China’s manufacturing sector returned to expansion in August, with a private survey showing the fastest pace of growth since March following a temporary pause in the U.S.–China tariff dispute.

Private survey signals renewed momentum

The RatingDog Manufacturing Purchasing Managers’ Index (PMI) climbed to 50.5 in August, exceeding economists’ expectations of 49.7 and rebounding from July’s 49.5. A reading above 50 indicates growth. The uptick was driven largely by stronger new orders and a rebound in export demand, suggesting foreign buyers continued to place orders despite lingering tariffs.

Analysts noted that the extended tariff truce, announced earlier this month, helped stabilize overseas demand. The truce keeps existing duties—estimated at 57.6 % on Chinese goods and 32.6 % on American products—in place for another 90 days while preventing additional increases.

Costs rise while hiring remains subdued

Average raw-material costs rose at the fastest rate in nine months, according to the survey. Some manufacturers passed those higher expenses on to customers, ending an eight-month streak of falling output prices. Despite the stronger order book, employment continued to contract for a fifth consecutive month as companies remained cautious about adding staff.

Profitability showed only a modest improvement and remains under pressure. RatingDog founder Yao Yu described the rebound as “a breath of relief rather than a sustained rally,” pointing to persistent weak domestic demand and the possibility that recent export orders are “overstretched.”

Contrast with official data

The private findings were more upbeat than the official PMI published a day earlier, which showed factory activity shrinking for a fifth straight month at 49.4. The divergence reflects the different survey samples: the official index covers more than 3,000 mainly upstream firms, while the private poll focuses on around 500 export-oriented manufacturers.

Outlook hinges on export stability and domestic demand

Beijing has intensified efforts to curb excess industrial capacity and fierce price competition that have weighed on margins. Authorities also continue to court trading partners in Southeast Asia, Europe and Latin America to offset declining shipments to the United States. At a summit in Tianjin on Monday, President Xi Jinping urged member states of the Shanghai Cooperation Organization to deepen trade ties and reject “Cold War mentality.”

Imagem: Internet

Whether the recent improvement can be sustained depends on two factors: stabilization of exports and a pickup in domestic consumption. Global trade remains vulnerable to policy shifts and economic slowdowns; the International Monetary Fund has repeatedly warned that prolonged trade tensions could curb worldwide growth.

Until clearer signals emerge, many Chinese manufacturers plan to limit hiring and focus on cost control, even as they welcome the short-term boost in orders.

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Image credit: Jade Gao / AFP