CHINA'S manufacturing sector showed signs of improvement in August, with the Caixin manufacturing purchasing managers' index (PMI) rising to 50.4, up 0.6 percentage point from July, bringing the index back above the expansion threshold. The data suggest a pickup in demand, steady employment levels and improving business confidence, but challenges remain in the face of external uncertainties, according to the survey published on Monday. A reading above 50 indicates an expansion in activity, while a number below signals a contraction. The production index in August saw a slight increase in the expansion range, while the new orders index reversed its contraction in July and returned to expansion territory. According to surveyed enterprises, growth in new orders was mainly driven by improvements in basic demand and various promotional measures. Employment in the manufacturing sector stabilized in August, with the employment index hovering in expansion territory. Manufacturers in the industry generally believe that factors such as business expansion, new product releases and an improvement in economic conditions will drive sales growth. Wang Zhe, a senior economist at Caixin Insight Group, said that the August PMI data suggest a modest recovery in the manufacturing sector, with both supply and demand expanding, but challenges remain in achieving stable growth in the face of external uncertainties. The Caixin data showed that external demand weakened in August, with the new export order index falling below the critical point for the first time this year, marking the lowest level since December 2023. China's official manufacturing PMI released by the National Bureau of Statistics (NBS) came in at 49.1 in August, down from 49.4 in July. Zhao Qinghe, an NBS statistician, attributed the slight drop to factors such as extreme weather and offseason production in some industries. Zhou Maohua, an economist at China Everbright Bank, told the Global Times on Monday that there is a need for increased implementation of macroeconomic policies, with a continued focus on boosting effective demand and promoting domestic circulation. The key priority is to accelerate the implementation of policies to fully unleash their benefits and boost market confidence. Additionally, policy support should be optimized based on the uneven recovery of different industries, Zhou added.