China’s Factory Slump Eases, But Services Drag

BEIJING, Sept 1, 2026 — China’s factory activity showed signs of improvement in August, though services remained weak, highlighting persistent imbalances in the economy and fuelling calls for stronger policy support.

The National Bureau of Statistics (NBS) Manufacturing Purchasing Managers’ Index (PMI) rose to 49.8 in August from 49.2 in July, indicating a slower pace of contraction and edging closer to stabilisation. Encouragingly, both the production index and new orders returned to expansion, while new export orders climbed slightly above 50, suggesting external demand and industrial activity provided some support. However, the headline PMI remained below the 50-point threshold, with smaller firms still facing challenging operating conditions.

Factory Slump

In contrast, the NBS Non-Manufacturing PMI stayed weak at 49.0, unchanged from July, reflecting continued contraction in services and construction. The services activity index held at 49.3, while construction slipped further to 46.9. Non-manufacturing new orders fell to 44.1, underscoring persistently soft domestic demand despite relatively positive business expectations.

The Composite PMI stood at 49.5, reinforcing the uneven recovery. Analysts noted that while manufacturing and export-oriented sectors, including AI and technology-related industries, are performing relatively better, domestic-oriented services and property-linked sectors remain sluggish.

External trade

Economists argue that external trade and industrial production alone may not be sufficient to generate a broad-based recovery. Calls are growing for targeted policy measures to stimulate household consumption, private investment, and property demand.

With China’s economy still struggling to regain momentum, the latest PMI data underscores the need for balanced reforms to ensure growth is not overly reliant on exports, but supported by stronger domestic demand.

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