China's factory activity returned to expansion in September, with the official manufacturing purchasing managers' index rising to 50.1 from 49.8 in August.
The reading ended a two-month contractionary streak and matched analyst expectations in a Reuters poll, according to National Bureau of Statistics data released Wednesday.
The official non-manufacturing index also moved back into expansionary territory at 50.2, supported by increased activity in services and construction.
National Bureau of Statistics chief statistician Huo Lihui attributed the modest expansion to accelerated operations in equipment, high-tech manufacturing, and consumer sectors.
Industrial producers continued to benefit from global artificial intelligence hardware demand.
However, higher energy costs linked to Middle East conflict pressed margins alongside sluggish domestic consumption.
Beijing Unveils Targeted Support Measures
To support full-year economic targets, Chinese policymakers introduced targeted monetary and fiscal measures on Tuesday.
The initiatives feature mortgage subsidies for eligible homebuyers, an expanded People's Bank of China lending support program for infrastructure and technology sectors, and reduced borrowing interest rates.
Economists expressed mixed views on the impact of Beijing's latest intervention.
A team of economists at Nomura wrote in a research note that the new round of supportive measures is not sufficient to bolster growth, adding that the steps were too small to address the real barriers to growth.
The fresh measures followed months of deteriorating economic indicators after a weak second quarter.
Macquarie China economist Larry Hu characterized the policy announcements as a targeted response to secure full-year growth goals between 4.5% and 5%.
Hu anticipated Beijing to act with less urgency to boost demand as long as exports remain strong.
Exports remain a central driver of the Chinese economy, though rising capacity concerns from foreign trading partners present potential headwinds.
Hu projects China's real gross domestic product growth to reach 4.4% in the third quarter and 4.7% in the fourth quarter, rebounding from 4.3% in the second quarter.
Goldman Sachs analysts noted that targeted credit easing primarily assists supply-side operations, making implementation crucial for broader economic expansion.
The mortgage subsidy, which runs for one year, could offer some direct support for housing demand and lift home sales in the short term by pulling forward some first-home purchases, Goldman Sachs analysts said.
However, strict eligibility requirements limiting subsidies to first-time purchases of property priced under 1.5 million yuan ($224,000) and under 120 square meters will likely limit overall growth impacts.
