China Manufacturing PMI Rebounds to 49.8 in August as New Orders Recover

China’s manufacturing sector showed signs of improvement in August, with the manufacturing purchasing managers’ index (PMI) rising to 49.8 from 49.2 in July. The reading was also better than the 49.5 median forecast cited by Bloomberg, as new orders returned to expansion territory.

According to UOB Kay Hian, the recovery was driven largely by stronger domestic demand. The new orders sub-index increased 2.1 percentage points to 50.6, moving above the 50-point threshold that separates expansion from contraction. Manufacturing output also improved, rising 0.5 percentage point to 50.4.

New export orders increased by 0.5 percentage point to 50.1, also moving into expansion territory. The stronger rise in overall new orders compared with export orders suggests that domestic demand played a larger role in the manufacturing sector’s August improvement.

Input Costs Rise as Margins Remain Under Pressure

Manufacturers also increased purchasing activity during the month. The purchases index climbed 1.1 percentage points to 50.5, while the imports index rose by the same amount to 48.6.

However, higher input costs continued to create pressure for manufacturers. The purchase prices index jumped 3.4 percentage points to 56.6. At the same time, the output prices index increased 2.6 percentage points to 50.4, returning to expansion territory.

The difference between purchase prices and output prices widened to 6.2 percentage points from 5.4 percentage points previously. According to UOB Kay Hian, the widening gap points to continued pressure on manufacturers’ profit margins.

Employment conditions remained weak. The manufacturing employment sub-index declined 0.3 percentage point to 48.7, while the business expectations index edged down 0.3 percentage point to 53.8.

Services and Construction Continue to Struggle

The improvement was concentrated in manufacturing, while China’s non-manufacturing sector remained in contraction.

The non-manufacturing PMI stayed at 49.0 in August, below Bloomberg’s 49.4 consensus forecast. Within the sector, the construction index slipped 0.1 percentage point to 46.9, while the services index was unchanged at 49.3.

Demand remained weak across non-manufacturing activities. The new orders sub-index declined 0.3 percentage point to 44.1, while new export orders remained at 47.0.

Input costs increased during the month, with the input prices index rising 1.4 percentage points to 51.1. The selling prices index also increased by 1.4 percentage points, reaching 49.3 but remaining below the expansion threshold.

Large Companies Show Stronger Performance

Performance also varied according to company size. The composite PMI for large enterprises returned to expansion at 50.6, an increase of 1.1 percentage points, supported by stronger manufacturing orders.

The medium-sized enterprise index, however, fell 0.3 percentage point to 49.4. The small-enterprise index improved by 0.5 percentage point but remained in contraction at 47.9.

UOB Kay Hian described August’s PMI results as mixed, noting that the recovery was mainly concentrated in manufacturing. The return of both new orders and new export orders to expansion was viewed as a positive sign, while weakness in the non-manufacturing sector continued to weigh on the broader economy.

The investment firm said China may need more targeted policy support in the coming months to help stabilise domestic demand during the second half of 2026.