SHENZHEN, CHINA – AUGUST 30: A man stands by the water overlooking the MSC and Ocean Network Express (ONE) container ships moored under a gantry crane at Yantian Port in Shenzhen, Guangdong Province, China, on August 30, 2026.
Chen Xin | Getty Images News | Getty Images
China’s factory activity returned to growth in September as the deepening economic downturn prompted policymakers to step up stimulus and boost growth.
The official manufacturing purchasing managers’ index rose to 50.1 from 49.8 in August, data from the Office for National Statistics showed on Wednesday, in line with analysts’ forecasts in a Reuters poll.
NBS chief statistician Huo Lihui said this gradual expansion was driven by accelerated activity in consumer industries as well as equipment and high-tech manufacturing.
Corporate activity picked up in the service sector, and the non-manufacturing PMI also returned to expansion territory, rising to 50.2, reaching the highest level this year in the construction sector.
Domestic manufacturers have benefited from the AI hardware boom, but rising energy costs due to the Middle East war are putting pressure on profits, and sluggish domestic consumer demand is a major concern.
“Mini stimulation”
China’s economic and monetary policymakers on Tuesday announced targeted fiscal and monetary policies to reduce funding costs and expand central bank lending, as the government calls for increased countercyclical support to put the economy on track to meet full-year growth targets.
Among the measures announced Tuesday are the Finance Ministry pledging mortgage subsidies for eligible homebuyers, and the People’s Bank of China expanding its loan support program for banks to finance infrastructure projects and provide loans to targeted sectors, including technology companies and small and medium-sized enterprises. The central bank also lowered interest rates on its programs to make housing more affordable.
“The new support package is not enough to spur growth,” Nomura’s team of economists said in a note, adding that the measures are too small to address real barriers to growth.
The move comes as economic data shows months of deterioration following a disappointing second quarter.
Larry Hu, China economist at Macquarie, said the policy announcement was a “small stimulus package” that would be “enough” to meet this year’s growth target of 4.5% to 5%. Hu predicted that as long as exports remained strong, Beijing would act with less urgency to boost demand.
Exports have been one of the few drivers of China’s economy this year, but the engine is showing signs of strain as domestic consumption lags and trading partners raise concerns about excess manufacturing capacity and dependence on external demand.
Hu expects China’s real GDP growth to pick up to 4.4% and 4.7%, respectively, in the last two quarters of this year, from a three-year low of 4.3% in the second quarter.
Moderate increase in housing prices
Goldman Sachs said Tuesday’s action was “more important as a policy signal than a short-term growth booster.” Targeted credit easing primarily supports the supply side, and whether it leads to investment and broader growth depends on how policy is implemented, the central bank said.
Analysts at Goldman Sachs said the mortgage subsidy, which would be in place for one year, would directly support demand for housing by bringing some first-home purchases forward and could boost home sales in the short term.
However, the bank expects the overall growth boost to be only modest, given the strict eligibility requirements – the subsidy is limited to first-time buyers of 1.5 million yuan ($224,000) or less and homes of 120 square meters or less.
—CNBC’s Evelyn Cheng contributed to this report.
