Nomura Asia Insight: China — August PMI Remains Weak

China's official manufacturing PMI recovered to 49.8 in August from 49.0 in July, beating consensus (49.5) and Nomura's forecast (49.2), but the non-manufacturing PMI stayed at 49.0, below expectations of 49.4. Within it, services held at 49.3 while construction slid to 46.9—the lowest reading since the COVID outbreak and an eighth straight month in contraction—with construction new orders at just 42.4. Nomura sees the data underscoring a wide divergence between resilient supply and weakening domestic demand; production, new orders and new export orders all held above 50. Price indices rebounded meaningfully—input prices to 56.6 from 53.2, output prices to 50.4 from 47.8—strengthening Nomura's confidence in its forecast that PPI inflation turns positive at +0.3% month on month in August (July: -0.7%). Backed by the global AI supercycle, it expects August export growth to stay elevated. On property, the new development model signals Beijing's resolve to eliminate delayed-delivery risk, but cash-strapped private developers face a huge overhang of bad debt from the five-year downturn; Nomura expects further policy measures later this year while cautioning that the economy's K-shaped character likely rules out large-scale stimulus.