China PMIs return to expansion territory, signalling modest growth uptick
The desk interprets China's recent PMI data, which indicates a return to modest growth, as a potential support for the yuan in FX markets. The manufacturing PMI has moved up to 50.1, while non-manufacturing has impressively reached 50.2, suggesting an uptick in economic activity that signals resilience amid a challenging environment. Per the full note from ING, these indices reflect improvements in production and prices, notwithstanding persistent weaknesses in domestic demand. Given the central bank's pivot towards supportive measures, the outlook appears cautiously optimistic.
What the desk is arguing
The recent rise in China's official manufacturing PMI to 50.1 and non-manufacturing PMI to 50.2 suggests a rebound in economic activity, signaling a cautious but encouraging outlook for the yuan. According to ING, this growth, albeit modest, reflects a potential shift in momentum that could aid the currency’s valuation.
The subindices reveal that production has risen to a high of 51.7, while pressures from higher raw material prices may also support an economic recovery. Despite ongoing challenges in domestic consumption, the PMIs indicate that manufacturing remains a relative strength within the economy.
Where it sits in our coverage
Our current consensus target for USD/CNY stands at 1.075, with a range of 1.04 to 1.12. Notably, firms are divided, with jpmorgan targeting 1.10 for the March 2026 tenor and bofa suggesting a more conservative stance at 1.04 for the same period.
This desk's view leans towards the upper bound of this range, in contrast to the position adopted by bofa, which reflects a more cautious outlook.
How other firms see it
In general, firms aligned with a bullish perspective on the yuan include jpmorgan and dbs, while those with a bearish stance include bofa. This divergence suggests that the market remains split on the impact of improved PMIs on currency dynamics.
Traders should keep a close eye on the performance of related currency pairs such as AUD/CNY and EUR/CNY as key indicators of sentiment that could either reinforce or challenge this thesis.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01China's manufacturing PMI returns to growth, suggesting economic resilience.
- 02Non-manufacturing PMI shows unexpected strength, indicative of potential recovery.
- 03The divergence in economic performance may support the yuan's valuation moving forward.
- 04Given price pressures, the manufacturing sector appears crucial for growth.
Market implications
Watch the USD/CNY pair, particularly around the 1.075 level, as it may signal the strength of the yuan following this positive PMI data. Given no high-impact events on the calendar, sentiment could be influenced by market positioning in response to economic forecasts.
Risks to this view
A reversal in the yuan's outlook could occur if upcoming economic data shows renewed weakness in domestic demand or unexpected policy changes from the PBoC that might hint at a less supportive stance. Additionally, global economic conditions could also create headwinds.
Older quick take Quick take Published 03:40 China China PMIs return to expansion territory, signalling modest growth uptick China’s official manufacturing purchasing managers’ index rose back into expansion territory at 50.1, while the non-manufacturing PMI showed a surprising recovery to 50.2. The data suggests we will see a modest uptick in economic activity in September 50.1 China's official manufacturing PMI As expected Manufacturing PMI returns to expansionary territory China's official manufacturing PMI data rose to 50.1 in September, coming in line with expectations (market: 50.1, ING: 50.1). This was the first time in three months that this survey has been above the 50-threshold demarcating expansion and contraction.
Looking at the subindices, the production subindex rose to 51.7, the highest level of 2026. New orders and new export orders both edged down 0.1pp to 50.5 and 50.0, respectively. The price subindices also picked up amid higher tech and energy prices.
The raw material price subindex rose to a 5-month high of 60.8, and ex-factory prices rose to 54.0, also a 5-month-high. The RatingDog manufacturing PMI, which uses a more export-oriented sample, unsurprisingly looked a fair bit stronger than the official PMI, up to 52.1 from 51.5. Overall, manufacturing has been a relative strength this year, though it has mostly been driven by external demand as domestic consumption and investment lag.
Measures announced by the State Council earlier this week may help bridge that gap a bit by year-end. But the divergence in China's economy remains clear. Manufacturing PMI returns to expansion as production hits a 2026 high Non-manufacturing PMI beats expectations The official non-manufacturing PMI rose to 50.2, comfortably beating expectations for a smaller uptick (market: 49.2, ING: 49.2).
The subindices showed broad-based improvement in September. While still in contraction territory, new orders and new export orders both picked up, rising to 46.5 and 48.5, respectively. Business expectations rose to 55.5, which was the highest level since January.
The price-related subindices also rose, with input prices up to 52.5, the highest level since 2023. Sales prices rose to 50.3, the first time they have been above 50 in three years. The RatingDog services PMI also beat forecasts, rising to 51.6.
Non-manufacturing PMI surprisingly returned to expansion PMI data hints at a modest September recovery The PMI data suggests that we will see a modest uptick in September's activity data when it comes out in a few weeks. Along with more favourable base effects, this might be enough to help third-quarter GDP recover from the 4.3% we saw in the second quarter. The price subindices in today's data also suggest inflation could heat up a bit in upcoming data.
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