China’s Factory Activity Returns to Growth in September as AI Demand Supports Manufacturing

China’s factory activity returned to expansion in September, ending two months of contraction as easing weather disruptions helped production recover and strong global demand for AI-related products continued to support the industrial sector.

The official manufacturing Purchasing Managers’ Index rose to 50.1 in September from 49.8 in August, according to data from China’s National Bureau of Statistics. A reading above 50 indicates expansion, while one below 50 signals contraction.

Manufacturing PMI Returns Above 50

September’s reading marked the first return to expansion after two consecutive months of contraction.

The result also matched the median forecast in a Reuters poll and suggested that factory conditions improved as weather-related disruptions eased and production resumed more normally.

A separate private-sector survey produced a stronger reading, with the RatingDog manufacturing PMI rising to 52.1, its highest level in five months.

AI Boom Supports Industrial Demand

Demand linked to artificial intelligence continues to provide support to China’s manufacturing sector.

Chinese factories are benefiting from global investment in chips, computers, servers and other AI-related hardware, helping offset weaker conditions in some traditional parts of the economy.

The trend is particularly important for manufacturers involved in electronics, semiconductor supply chains, data-centre equipment and advanced industrial components.

Production and New Orders Improve

September’s survey showed improvements in both production and new orders.

This indicates that factories were not only increasing output but also receiving stronger demand compared with the previous month.

The improvement follows a period in which extreme weather disrupted operations in several regions, affecting factory schedules and logistics.

With those disruptions easing, manufacturers were able to resume production more consistently.

Advanced Manufacturing Remains a Bright Spot

China’s technology-oriented manufacturing sector continues to outperform many traditional industries.

Earlier data showed strong growth in sectors benefiting from the AI investment cycle, including chips, computers, electronics and advanced equipment.

These industries are becoming increasingly important to China’s industrial growth as the country expands investment in advanced manufacturing and technology supply chains.

Broader Economic Recovery Remains Uneven

The improvement in factory activity does not mean weakness elsewhere in the economy has disappeared.

Consumer spending and investment remain relatively soft, while the prolonged property downturn continues to weigh on domestic demand.

This creates an increasingly uneven pattern in which technology manufacturing and exports are performing more strongly than parts of the domestic economy.

The non-manufacturing PMI, covering services and construction, edged up to 50.2, indicating only modest expansion outside manufacturing.

AI Manufacturing Becomes a Key Industrial Growth Engine

China’s September PMI data reinforces the growing importance of AI-related manufacturing to the country’s industrial economy.

As investment in data centres, semiconductors and high-performance computing continues globally, Chinese suppliers remain deeply involved in producing the components and equipment needed for that expansion.

For manufacturers, the September rebound suggests that advanced technology, electronics and AI infrastructure demand are becoming increasingly important drivers of factory activity, even as broader economic conditions remain mixed.