PMI Breaks Below-50 Streak
China's manufacturing sector returned to expansion in June 2026, with the official Purchasing Managers' Index rising to 50.3 percent from 50.0 percent in May — a 0.3 percentage-point improvement that took the index above the critical 50-point threshold separating growth from contraction for the first time in three months, according to the National Bureau of Statistics.
Sub-Index Breakdown
The production sub-index climbed to 51.4, reflecting increased factory output, while new orders edged up to 50.8, suggesting improving demand conditions. The employment sub-index remained marginally below 50, indicating that manufacturers remain cautious about hiring. Supplier delivery times shortened marginally, a sign of easing supply-chain pressure.
Services Still Dominant
The non-manufacturing PMI, covering services and construction, held well above 50 throughout H1 2026, with the composite index pointing to an economy still led by the services sector even as manufacturing shows tentative signs of stabilisation. The construction sub-index benefited from ongoing infrastructure projects and the early stages of urban renewal programmes.
Policy Implications
The return to expansion offers the People's Bank of China some breathing room, though officials are unlikely to declare victory given the fragility of the recovery. Market participants are pricing in a steady LPR for the coming months as policymakers assess the impact of existing easing measures on the real economy.