China’s manufacturing sector showed slight improvement in August as export demand remained strong, although overall factory activity continued to contract, according to official data released Monday. The National Bureau of Statistics reported that the manufacturing Purchasing Managers’ Index (PMI) edged up to 49.8 in August from 49.2 in July. While this marks a modest recovery, the figure remains below the 50-point threshold that indicates expansion.
The PMI measures business conditions through monthly surveys of companies, with scores above 50 signaling growth and those below indicating contraction. Analysts had generally anticipated a less favorable outcome, making the August reading a somewhat positive surprise.
Several key PMI sub-indexes moved back into expansion territory last month. The production index rose to 50.4 from 49.9, new orders increased to 50.6 from 48.5, and new export orders improved to 50.1 from 49.6. Huo Lihui, chief statistician at the National Bureau of Statistics, said the figures demonstrated an improvement in China’s overall economic conditions during August.
China’s export sector has been a crucial driver behind this resilience. Official data showed exports surged nearly 24% year-on-year in July and increased by more than 18% in the first seven months of 2026. The growth has been supported largely by strong global demand for high-tech products, particularly semiconductors, spurred by the rapid expansion of artificial intelligence applications. Additionally, rising energy prices linked to ongoing geopolitical tensions, including the conflict in Iran, have boosted demand for electric vehicles, further fueling export growth.
Trade patterns are also shifting as China expands its sales to Europe and Southeast Asia, partly offsetting the impact of renewed U.S. tariffs imposed following President Donald Trump’s return to office last year. Max Zenglein, senior economist for the Asia Pacific at The Conference Board, noted that accelerating demand for green technologies has become an important factor underpinning export gains.
Looking ahead, trade relations between the United States and China are expected to feature prominently in an upcoming meeting between Trump and Chinese President Xi Jinping scheduled for late September. Despite the encouraging export numbers, domestic consumption remains muted, dampened by ongoing challenges in the property market. This has contributed to slower overall economic growth, with China’s economy expanding at an annualized rate of 4.3% in the April-June quarter, marking its slowest pace in more than three years.