Caixin PMI for August increases to five-month high

A major privately surveyed index monitoring China's manufacturing sector recovered in August to rise into expansionary territory and register a five-month high, indicating improvement in economic fundamentals.

Resilient domestic growth is helping the world's second-largest economy surf through external headwinds, said economists, who called for more policies to advance stable growth in the face of any continuing downside pressure.

The Caixin/Markit manufacturing purchasing managers index for August was 50.4, up from 49.9 for July, marking the quickest expansion of the sector since March, according to a report released on Monday by media group Caixin and information provider IHS Markit.

A PMI reading above 50 reflects economic expansion, while one below 50 indicates contraction.

Supporting the higher PMI reading was the rapidest expansion of output over five months, which surveyed managers — purchasing executives in over 500 Chinese manufacturing companies — mostly attributed to signs of stronger demand, according to the report.

The survey showed improved domestic demand helped to offset slackened external demand, as total new orders received by Chinese manufacturers was broadly stable during August despite the quickest fall in exports since November.

The employment subindex was at a level only marginally lower than the 50-point mark last month, showing improvement in labor market conditions, the report said.

"Against the backdrop of external uncertainties, China is actively tapping economic growth potential from within," said Cheng Shi, managing director and chief economist at ICBC International Holdings.

China's economic growth is expected to stabilize in the second half of the year, given domestic growth resilience and ample room for policy reaction, Cheng said.