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Data released by the Service Industry Survey Center of China's National Bureau of Statistics (NBS) on August 31 showed that China's official manufacturing Purchasing Managers' Index (PMI) stood at 49.8% in August 2026, up 0.6 percentage points from July, marking a notable improvement in the sector's overall sentiment. This was the second consecutive month the official manufacturing PMI remained below the 50% break-even line, but the reading beat market expectations of around 49.7%, indicating that while manufacturing activity was still contracting, the pace of contraction narrowed markedly from the previous month, with both production and demand showing signs of a pickup. Xinhua News Agency cited the NBS data in its report the same day.

The Purchasing Managers' Index is a widely used macroeconomic monitoring tool internationally. It is compiled from surveys of corporate purchasing managers and combines sub-indices covering output, new orders, new export orders, raw material inventories, employment, and supplier delivery times, with 50% serving as the dividing line between expansion and contraction: a reading above 50% indicates the sector as a whole is expanding, while a reading below 50% indicates overall contraction. China's PMI survey covers both manufacturing and non-manufacturing (including services and construction), and is jointly released at the end of each month by the NBS Service Industry Survey Center and the China Federation of Logistics and Purchasing (CFLP). It is one of the most important leading indicators for tracking changes in China's macroeconomic climate.

On a sub-index basis, the manufacturing production index came in at 50.4% in August, up 0.5 percentage points from July and back in expansionary territory, indicating that factory output activity picked up. The new orders index rose sharply by 2.1 percentage points to 50.6%, also moving from contraction back into expansion, reflecting a notable improvement in market demand. The new export orders index likewise climbed back above 50%, pointing to a marginal improvement in external demand. However, the employment index fell further to 48.7% from 49.0% in July, showing that hiring sentiment among manufacturers remained weak. The purchasing volume index rose to 50.5%, and the supplier delivery times index returned to expansion at 50.1% for the first time in about seven months. On prices, driven by recent increases in international crude oil and non-ferrous metal prices, the major raw materials purchase price index and the factory-gate price index came in at 56.6% and 50.4% respectively, up 3.4 and 2.6 percentage points from July — with the factory-gate price index moving back into expansion after several months, indicating that both input costs and selling prices for manufacturers rose in tandem.

By sector and company size, the equipment manufacturing and high-tech manufacturing PMIs stood at 51.4% and 52.9% respectively in August, continuing to run at relatively high levels of prosperity and extending the trend of manufacturing upgrading toward higher-value segments. The consumer goods industry PMI and the high energy-consuming industry PMI came in at 49.0% and 47.9%, up 1.2 and 0.9 percentage points respectively — both improved but remained in contraction. Among the 21 manufacturing sub-sectors surveyed by the NBS, PMI readings rose in 16, a notably broader spread of improvement. By enterprise size, the large-enterprise PMI climbed back into expansion at 50.6%, up 1.1 percentage points, playing an outsized role in supporting the overall rebound, while small and medium-sized enterprises' PMIs also improved but stayed below 50%, reflecting relatively greater operating pressure.

In contrast to the rebound in manufacturing, the non-manufacturing business activity index came in at 49.0% in August, unchanged from July and still in contraction, highlighting a divergence between the manufacturing and non-manufacturing sectors. Analysis from the CFLP and NBS pointed to notable divergence within the non-manufacturing sector itself: the construction industry's business activity index rose above 52%, with its new orders index also improving and its business activity expectations index climbing above 54%, indicating a marginal pickup in construction. In services, boosted by summer travel spending, the business activity indices for rail and air transport both rose above 52%, the culture, sports and entertainment index stayed above 54% for a second consecutive month, and internet and software information technology services held above 54% since April, hitting a year-to-date high. However, some contact-intensive and discretionary consumer service sectors remained sluggish, weighing on the overall non-manufacturing reading. The composite PMI output index came in at 49.5%, up 0.2 percentage points from July, suggesting that overall business activity in China remained broadly stable.

Alongside the official PMI, the Caixin China manufacturing PMI (now sponsored by RatingDog) came in at 51.5 in August, up further from 50.9 in July, extending its run above the 50 break-even line for several consecutive months. The Caixin survey places more weight on small and medium-sized, privately owned and export-oriented firms; it showed new orders rising for a 15th consecutive month, the longest expansion streak since 2018, with new export orders growing at their fastest pace in six months. According to Caixin Insight Group, firms attributed the improvement in orders to better market conditions, stronger client demand, the addition of new clients, and increased export business activity. The divergence between the official and Caixin PMI readings partly reflects differences in sample composition and firm-size coverage between the two surveys.

Analysts offered differing views on the signal sent by August's PMI data. Zhang Liqun, an analyst with the China Federation of Logistics and Purchasing, said that although the manufacturing PMI improved from July, the reading remained below the 50% break-even line, business confidence remained unstable, and the foundation for an economic recovery still needed to be consolidated. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said it was too early to conclude that China's economy had bottomed out and rebounded. Xu Tianchen, a senior economist at the Economist Intelligence Unit, noted that the pickup in domestic demand signaled in August appeared more closely tied to AI-related investment and exports than to direct policy stimulus. Lynn Song, ING's chief economist for Greater China, said that because China's services sector is more domestically oriented, the softness in the non-manufacturing data suggests domestic consumer demand remained relatively weak in August; he added that stimulus measures such as interest subsidies on loans "may have a relatively marginal" boost to the economy and expects further supportive measures in the weeks ahead.

An article recently published in the People's Daily said China's economic growth does not rely excessively on strong stimulus policies and that the country is capable of achieving its full-year growth target. Analysts broadly agreed that August's PMI data sent a mixed signal: core indicators such as manufacturing production and new orders improved, and equipment manufacturing and high-tech manufacturing continued to grow relatively quickly, creating favorable conditions for industrial activity to stabilize going forward. But manufacturing overall remained in contraction, the non-manufacturing business activity index was flat at 49.0%, the recovery in services consumption was uneven, and the weaker employment index pointed to continued pressure to stabilize growth and jobs. Markets widely expect that whether China's manufacturing and overall economic sentiment can continue to improve in September and the fourth quarter, as further pro-growth measures take effect, will be an important indicator to watch for the trajectory of China's economy this year.