China’s factory activity shrank for a second straight month in August, though the contraction was smaller than economists had anticipated, adding pressure on Beijing to shore up the slowing economy.
The official purchasing managers’ index came in at 49.8 in August, an improvement from 49.2 recorded in July, according to data released Monday by the National Bureau of Statistics.
The August reading beat the forecast of 49.6 projected by Reuters-polled economists, offering a modest but meaningful signal that the pace of deterioration may be easing slightly.
Any PMI reading below 50 indicates contraction in factory activity, meaning Chinese manufacturing has now declined for two consecutive months despite the marginal improvement.
China’s economy has come under mounting strain, with growth slowing to 4.3% in the second quarter, the weakest pace since late 2022, as soft domestic demand continues to weigh heavily on activity.
A prolonged property slump has compounded the pressure, dragging on investment and consumer confidence across the broader economy through the first half of 2026.
The economic malaise deepened further in the second half of this year, as consumer spending stalled, urban investment contracted at a faster pace, and unemployment ticked higher.
Retail sales and industrial output both slowed in July, while growth in industrial profits cooled to its weakest pace recorded this year.
Exports have been one of the few pillars propping up growth this year, with a global boom in AI infrastructure spending lifting demand for Chinese-made tech goods and outbound shipments recording double-digit growth for most of 2026.
Chinese policymakers have pledged to roll out new policy measures in a timely manner and flagged room for further fiscal spending and monetary easing to help stabilize the economy.
Economists, however, said the scale of any upcoming support will likely be limited, tempering optimism about a meaningful near-term recovery in manufacturing and broader economic activity.
Beijing faces a difficult balancing act as it tries to stimulate domestic demand and investment without unleashing excessive debt or undermining longer-term financial stability goals.
