China’s factory activity grew faster than expected in June on demand for tech exports
LIANYUNGANG, CHINA – JUNE 28: A worker works on a carbon fiber production line at the Lianyungang site of CNBM subsidiary Zhongfu Shenying Carbon Fiber Co., Ltd. on 28 June 2026 in Lianyungang, Jiangsu Province in China.
Wang Jianmin | Visual China Group | Getty Images
China’s manufacturing activity grew faster than expected in June boosted by strong demand for high-quality exports amid the global AI boom.
The official purchasing managers’ index reached 50.3 in June, beating the economic forecast of 50.1, returning to an extended range above the 50-point threshold. The index stood at 50 in May.
The non-manufacturing gauge, which tracks construction and services activity, rose to 50.2 from 50.1 in May, according to data released Tuesday by the National Bureau of Statistics.
China’s manufacturing engine has remained strong this year, with rising investment in artificial intelligence that has lifted imports from the Middle East, even as domestic demand remains weak.
The world’s second-largest economy showed signs of recovery in June after two months of slow growth, with manufacturing activity and retail sales rising, according to the China Beige Book, an independent research firm that surveys 1,321 Chinese businesses.
Exports remain a bright spot as US buyers rush to deliver goods after President Donald Trump’s meeting with Chinese leader Xi Jinping in May set a strain on relations. The front-loading also came before the expiry of the 10% tax under Section 122 in July.
The US has yet to impose additional duties that could arise from Washington’s Section 301 investigation targeting countries identified with excessive capacity and forced labor practices.
The K shape deepens
Separate data released on Saturday showed industrial gains in upstream sectors, as well as AI and renewables-related industries, posting sharp gains, while downstream producers remained under pressure amid weak domestic demand.
China’s retail sales fell in May for the first time in more than three years, and new home prices fell at a faster pace, reflecting the drag from a prolonged asset slump.
The RatingDog manufacturing PMI, a private survey that usually captures small and large export-oriented firms, is expected to drop to 51.6 from 51.8 in May, when results are released on Wednesday. The gauge has historically been running above the official PMI reading, a measure that reflects the strength of a country’s exports.
“Hope for a rebalancing is fading,” said Helen Qiao, China economist at Bank of America Global Research, noting strong exports and weak domestic demand. The bank raised its forecast for China’s export growth this year to 15%, citing strong AI-related investment, global demand for renewable energy equipment and electric vehicles.
The imbalance between strong supply and muted demand is likely to revive downward pressure on inflation in the second half of this year, once the rise in higher energy costs has faded, Qiao added.
Chinese policymakers have avoided easing to boost demand this year, with economists largely ruling out near-term stimulus, such as policy rate cuts. Goldman Sachs expects rising monetary pressures to encourage increased support through faster government borrowing in the coming months, while leaving the door open to reducing expansion if third-quarter GDP disappoints.
