BEIJING — China’s factory activity returned to expansion in September, offering a fresh signal that industrial conditions improved as the third quarter ended. The recovery was supported in part by strong demand linked to artificial intelligence and technology products, although weak consumption and investment continue to weigh on the broader outlook.
The official manufacturing Purchasing Managers’ Index rose to 50.1 in September from 49.8 in August, according to China’s National Bureau of Statistics. A reading above 50 indicates expansion, while a reading below 50 indicates contraction.
Factory production picks up
The production sub-index reached 51.7 in September, indicating that manufacturing output expanded more strongly than in the previous month. New orders also returned above the 50 mark, reaching 50.5.
The improvement suggests that factories entered the final quarter with somewhat stronger demand. However, one month’s PMI does not establish a long-term trend, particularly when several parts of the economy remain under pressure.
AI is becoming an important industrial driver
Artificial intelligence has become one of the most significant sources of technology investment worldwide. Data centers, servers, chips, networking equipment and electricity infrastructure are all receiving investment as companies build AI capacity.
Chinese manufacturers are participating in this expansion by supplying a wide range of technology products and industrial equipment. High-tech manufacturing has been among the stronger parts of China’s industrial economy.
Small businesses remain under pressure
The overall PMI figure masks differences between company sizes. Smaller manufacturers have faced weaker conditions than many large companies, reflecting differences in financing access, pricing power and exposure to domestic demand.
This is one reason Chinese policymakers have expanded targeted financial support for private companies and small businesses. The central bank recently increased the quota of a relending facility supporting agriculture and small and micro enterprises.
Domestic demand remains a key challenge
China’s economy has benefited from strong exports, particularly in high-tech products. But domestic consumption has remained comparatively weak in some areas.
For manufacturers, strong domestic orders are important because they can provide a more stable source of demand than international markets, where tariffs and geopolitical tensions can change quickly.
Exports provide continued support
China’s exports rose sharply in August, supported by demand for high-tech and AI-related products. High-tech exports increased 42.9% in value during the first eight months of the year, according to data reported by Reuters.
The strength of exports has helped Chinese factories maintain production despite domestic weakness. But policymakers also want to ensure that growth is not overly dependent on external demand.
Property remains an economic drag
The property downturn continues to affect confidence among households and businesses. Housing has traditionally been an important store of wealth for Chinese families, while construction and real estate activity support many related industries.
Authorities have introduced housing-loan interest subsidies and other measures aimed at stabilizing the sector. The impact of these policies will depend on whether they improve buyer confidence and housing demand.
September brings several positive indicators
Manufacturing was not the only area to show improvement. China’s services sector also expanded in September, according to a private survey. The RatingDog China General Services PMI rose to 51.6, while the private manufacturing PMI reached 52.1.
The combination of manufacturing and services expansion suggests broader activity improved at the end of the quarter. Still, price competition and weak demand in some sectors remain concerns.
Why the final quarter matters
China has set a 2026 GDP growth target of 4.5% to 5%. With the economy slowing to 4.3% growth in the second quarter, policymakers face pressure to maintain momentum through the final months of the year.
Industrial activity, household consumption, infrastructure investment and exports will all influence the final result.
National Day holiday offers another test
The October 1 National Day holiday provides an opportunity to observe consumer spending and domestic travel. Tourism, restaurants, transportation and retail businesses typically experience a major increase in activity during the holiday period.
Strong holiday consumption would provide a useful signal about household confidence, although holiday spending alone would not determine the direction of the wider economy.
What manufacturers will watch
Companies will monitor new orders, raw-material costs, export demand and selling prices during October. Businesses will also watch government support measures and developments in U.S.-China trade relations.
For international companies, China’s manufacturing recovery matters because the country remains a central part of global supply chains. Changes in Chinese production and prices can affect suppliers and competitors worldwide.
The bigger picture
September’s PMI improvement is an encouraging industrial signal, but it comes with important qualifications. Technology and export demand are strong in some areas, while consumption, property and smaller manufacturers continue to face challenges.
The coming months will show whether the September improvement develops into a broader and more sustained recovery.
Follow more China developments through our Business section, Technology section and International News section.
Source: China’s National Bureau of Statistics and Reuters reporting.
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