PMI Quarterly On China Manufacturing – Issue 65 (July 2026)

PMI points to sustained growth in the manufacturing sector in 2Q26

Our observations

• Large and medium enterprises are experiencing growth, while small enterprises continue to contract.
• Manufacturing output expands steadily.
• Overall market demand is recovering.
• Manufacturers are lowering ex-factory prices despite rising input costs.
• Employment in the manufacturing sector is relatively stable.

Policy outlook

• A meeting of the Political Bureau of the Communist Party of China Central Committee was held on 28 April. It emphasized the need to implement a more proactive fiscal policy and an appropriately accommodative monetary policy.
• We expect the Chinese government to maintain policy support in 3Q26, which will help the economy navigate external challenges and sustain steady growth.

Our forecasts for 3Q26

• We project stable growth in manufacturing production. While sluggish infrastructure and real estate investment as well as a global economic slowdown will weigh on China’s industrial production, the global AI boom and ongoing energy transition will continue driving the production and export of AI-related and green-tech products.
• Headline PMI is likely to hover above 50.0.
• VAIO growth is expected to reach 4.5%-5.0% yoy.
• Real GDP growth is projected at 4.5% yoy.
• Exports are expected to see double-digit growth.
• Year-on-year growth rates for the purchaser price index and the PPI will remain elevated, due primarily to high global commodity prices and a low comparison base in 3Q25.