China August official factory PMI rises to 51.7, services slips to 53.4

China’s official manufacturing Purchasing Manager’s Index (PMI) rose to 51.7 in August, up from 51.4 in July, China’s National Bureau of Statistics (NBS) released on Thursday.

"The reading, the second highest so far this year, showed a steady upward trend in China's manufacturing sector," said Zhao Qinghe, an NBS senior statistician.

Domestic demand increase, a manufacturing boom in consumer goods and high-tech sectors are reasons behind the accelerated growth, according to Zhao.

“The PMI index remained above the 50-point mark [which differentiates expansion from contraction] for the 13th straight month. It suggested the country’s economy is in stable growth,” said Zhang Liqun, a special analyst with China Federation of Logistics & Purchasing.

Ren Zeping, an analyst with Founder Securities, said the August index was above expectation. He predicted, “China’s economy is at the beginning of a new economic cycle, (which means products will achieve supply and demand balance, corporate profits will improve, and bad loan rates will lower).”

However, CIB Research, a unit under Industrial Bank, predicted the current growth is likely to overdraft the future capacity.

“The data reflects enterprises probably have fulfilled their production plan ahead of schedule as a counter measure towards production restrictions for environment protection concern in heating season,” the research unit explained.

Meanwhile, the country’s official services PMI fell to 53.4 in August from the previous month’s 54.5, according to NBS.

The slower expansion was due to rainstorms and floods in certain regions, Zhao explained.

"Though at a slower pace, the performance of China's non-manufacturing sector continues to maintain robust momentum," Zhao said.

The country counts on growth in services and consumption to rebalance its economic growth model, which, as a target of the ongoing structural reform, heavily relies on investment and exports.

Last year, services accounted for over half of the country’s GDP.