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China’s manufacturing sector expands, beating market expectations, official August data shows

Manufacturing at China’s big state-owned firms unexpectedly expanded, according to an official August survey published on Thursday.

China’s manufacturing purchasing managers’ index, which reflects conditions largely at state-owned companies, came in much better than expected at 50.4 last month, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A reading above 50 indicates expansion, while one below means contraction.

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The previous month’s reading was 49.9 and the market had expected a contraction to 49.8 in August.

A sub index for manufacturing output rose to 52.6 from July’s 52.1.

New orders edged up 0.9 percentage point to 51.3, while new export orders gained 0.7 percentage points to 49.7.

The official purchasing managers’ index outside the manufacturing industry, however, edged down by 0.4 percentage points to 53.5 last month, signalling slowing growth in the services sector.

Economists said the economy would keep facing headwinds set against weak external demand and lacklustre domestic investment.

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“We keep our projection of a challenging economic environment in China,” said David Qu, an economist at commercial bank ANZ in Shanghai, ahead of the release of data.

“The G20 meeting, which caused some suspension of production in coastal areas, could also drag down on the August PMI,” said Qu, referring to the meeting of international leaders in Hangzhou this weekend.