China Factory Contraction Eases but Weak Services Cloud Recovery

Beijing, China, 31 August 2026 – China’s factory downturn moderated in August as stronger orders and production lifted the official manufacturing purchasing managers’ index, but weakness across services and construction showed that the recovery remains uneven. The manufacturing PMI rose to 49.8 from 49.2 in July, exceeding the median forecast of 49.6 while remaining below the 50-point threshold separating expansion from contraction.

The improvement offers some relief after a difficult period for producers, especially because the sub-indexes for new orders and output returned to expansion territory. Stronger demand can help companies reduce inventories, stabilise employment and improve cash conversion. Yet one better monthly reading does not establish a durable rebound, particularly when external trade and technology-related investment may be doing more of the work than household consumption or broad-based private investment.