China's Factory Activity Seen Returning to Growth as AI Demand Supports Exports

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Beijing: China's manufacturing sector is expected to return to modest growth in June, supported by strong demand for technology exports linked to the global artificial intelligence boom, although weak domestic demand continues to weigh on the economy.

Economists surveyed by Reuters forecast that China's official manufacturing Purchasing Managers' Index (PMI) will edge up to 50.1 in June from 50.0 in May, moving just above the level that separates expansion from contraction.

Strong overseas demand for semiconductors, computer equipment and other high-tech products has helped offset concerns about slowing global trade and geopolitical tensions. Analysts also said some exporters accelerated shipments ahead of possible new US tariffs expected later this year.

However, signs of broader economic weakness persist. Recent data showed declining retail sales, falling home prices and weak demand for loans, highlighting continued pressure on consumer spending and the property sector.

Industrial profits have remained uneven, with technology and upstream industries reporting gains while many consumer-facing manufacturers continue to struggle. Economists said China's economic growth is becoming increasingly dependent on high-tech exports as domestic demand remains subdued.

A separate private survey of factory activity, due later this week, is also expected to indicate continued expansion in the manufacturing sector.