Industrial activity in China grows again driven by the AI boom
China's industrial activity returned to growth in June, driven by demand for chips, computers and other AI-related products, as export orders and forward shipments to the United States to get ahead of tariffs offset weakness in other sectors of the economy.
The data suggests that global investment in AI is serving as an important buffer for manufacturers in the Chinese economy, even as problems arising from the Middle East conflict and the prolonged real estate crisis still weigh on overall growth.
The official PMI (Purchasing Managers Index) for the industrial sector rose to 50.3 in June, compared to 50.0 in May, according to research by the National Department of Statistics. The result surpassed the 50.0 forecast in a Reuters poll.
"Exports to meet international demand for chips and other AI-related products, as well as advance orders to prepare for new US Section 301 tariffs expected at the end of July, and improving domestic demand due to lower costs in the input sector supported this improvement," said Dan Wang, China director at consultancy Eurasia Group.
The number of domestic infrastructure projects has also seen a slight increase over the past month, she added.
U.S. retailers have brought forward orders to China by four to six weeks to secure their stocks for Black Friday and Christmas sales ahead of expected tariff increases later this year, transportation executives said.
The new export orders sub-index expanded again in June, rising from 48.6 to 50.1, while the production and overall new orders indicators advanced slightly to 51.4 and 51.2, respectively, compared to 51.2 and 49.9.
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Factory gate prices, however, fell from 51.9 in May to 48.2, after five months of expansion, with employment also continuing to trend downward.
"Export strength is expected to continue, driven by global demand for AI investment," said Xu Tianchen, senior economist at the Economist Intelligence Unit. "Secondly, there will be more easing."
"For example, fiscal spending fell short of budget forecasts and is expected to accelerate in the coming months. There is also room for monetary easing," he added.
The PMI for the non-manufacturing sector, which includes services and construction, improved to 50.2 from 50.1 in May, while the composite PMI came in at 50.6 from 50.5 in the previous month.
Source: CNN