Chinese industrial activity expands in June thanks to technology exports

China's industrial activity showed signs of expansion in June, driven largely by exports tied to technological advancements, particularly in the field of artificial intelligence. According to official statistics released by the National Bureau of Statistics, the Purchasing Managers' Index (PMI) for the manufacturing sector rose to 50.3 points in June, surpassing the previous month's reading of 50 and beating economists' expectations. This index, measured on a scale from 0 to 100, indicates economic growth when above 50 and contraction when below that threshold.

Key indicators within the PMI reflected a positive trend. The new orders sub-index climbed to 51.2 points in June, compared to 49.9 in May, signaling increased demand for goods. Similarly, the production indicator rose to 51.4 points, up from 51.2 in the prior month. These figures suggest that Chinese manufacturers are experiencing heightened activity, primarily fueled by external demand rather than domestic consumption.

Julian Evans-Pritchard, an economist specializing in China for Capital Economics, noted that while the economy has regained some momentum, it remains heavily reliant on exports and technology related to artificial intelligence. He emphasized that the primary driver of growth in the manufacturing sector continues to be foreign demand. Huo Lihui, a statistician from the National Bureau of Statistics, stated in a press release that the June data indicate an improving economic climate in China.

Despite these encouraging numbers, several economists have raised concerns about the continued caution among Chinese consumers. After years of turmoil in the real estate sector, internal demand remains weak. Lynn Song, an economist for Greater China at ING, suggested that new government measures aimed at stimulating consumption and investment could be beneficial in preventing an increasingly unbalanced growth model.

The Chinese government has set a target for economic growth between 4.5% and 5% for the year, a goal that analysts believe is achievable with the support of strong export performance linked to artificial intelligence. This aligns with a broader strategic shift seen in Chinese industry, where companies are increasingly focusing on building more resilient and adaptable supply chains through the integration of AI technologies.

At the recent China International Supply Chain Expo, businesses highlighted how artificial intelligence is enabling manufacturers and logistics companies to navigate geopolitical uncertainties and evolving global trade dynamics. Companies displayed innovations demonstrating how AI is transforming traditional manufacturing processes and logistics operations.

One notable example was the participation of iFlytek, a leading Chinese AI firm renowned for its speech recognition technology and large language models. At the expo, iFlytek presented AI-powered robotics designed for logistics and manufacturing applications. Dong Bin, the firm’s deputy general manager for brand marketing, emphasized the importance of moving AI beyond digital interfaces into the physical world to enhance its practical utility.

iFlytek's embodied AI technology integrates data collection, training, and inference into a single system, addressing a significant challenge in robotics—lack of sufficient training data. This technology is currently being implemented in logistics and intelligent manufacturing, performing tasks such as warehouse picking and cargo sorting. Other sorting robots demonstrated at the expo included those capable of identifying products based on color, size, and shape, with some robotic arms achieving speeds of up to 1.5 meters per second, thereby increasing factory efficiency and reducing reliance on manual labor.

Experts argue that AI is increasingly being utilized throughout the entire supply chain, connecting all stages from research and development to manufacturing, distribution, and downstream applications. Hao Jianbin, a research fellow at Shanghai University of Finance and Economics’ Digital Frontiers Research Institute, explained that AI enables supply chains to become more responsive and adaptable, allowing them to anticipate changes and adjust accordingly.

This emphasis on flexibility underscores a broader initiative by businesses to create more robust supply chains amidst geopolitical and trade uncertainties. Many firms are not only adopting AI but also reconsidering their manufacturing and operational strategies. For instance, Anhui Jiexun Optoelectronic Technology, a manufacturer of sorting equipment, plans to significantly increase its overseas presence, aiming to more than double its international offices from nine to 20, including locations in Vietnam and Australia.

Xu Jianwei, CEO of the company's Spanish subsidiary, outlined the strategy of localization as a means to mitigate political risks. The firm produces intelligent sorting systems for food products such as rice, tea, salt, nuts, and grains using cameras and AI to detect defects like discolored or damaged nuts, thus enhancing quality control. Beyond food processing, the company is adapting this technology for other sectors, including the sorting of used batteries for recycling purposes.

These developments highlight the transformative role of artificial intelligence in reshaping China's industrial landscape, emphasizing resilience, efficiency, and adaptability in response to both domestic and international challenges. As companies continue to innovate and integrate AI into their operations, the future of Chinese manufacturing appears poised for further evolution and growth.