China Factory PMI Beats Forecast at 50.3 as AI-Linked Exports Drive Expansion

Manufacturing returns to expansion

China's factory activity moved back into expansion in June, with an official survey showing high-tech exports tied to the artificial intelligence boom offsetting weak domestic demand, according to data from the National Bureau of Statistics reported by TradingView. The official manufacturing purchasing managers' index rose to 50.3 from 50.0 in May, beating the 50.1 forecast in a Reuters poll of economists and moving back above the 50 threshold that separates expansion from contraction.

The non-manufacturing PMI, which captures services and construction, improved to 50.2 from 50.1, ahead of the 49.9 consensus estimate. The composite measure rose to 50.6 from 50.5. All three readings beat expectations.

Strength concentrated in AI-linked exports

The improvement was concentrated almost entirely in sectors tied to global technology demand. Exports of automated data processing equipment — the category covering semiconductors and components that power AI data centres — jumped 60% in value terms year-on-year in May, according to the latest available trade data cited by TradingView. By contrast, exports of furniture, a proxy for broader consumer goods demand, grew just 1.9% over the same period.

• Manufacturing PMI: 50.3 in June, up from 50.0, versus a 50.1 forecast
• Non-manufacturing PMI: 50.2, up from 50.1, versus 49.9 consensus
• Composite PMI: 50.6, up from 50.5
• AI-linked data processing equipment exports: +60% year-on-year in May
• Furniture exports: +1.9% year-on-year in May

Domestic demand remains weak

Conditions on the domestic side stayed considerably weaker. Retail sales fell in May for the first time in more than three years, and new home prices declined at a faster pace than in prior months, extending a property downturn that continues to weigh on household wealth and spending. In response, China's central bank instructed some commercial banks to increase lending this month, according to people familiar with the matter cited by TradingView — the latest sign that policymakers see the $20 trillion economy as insufficiently supported by organic demand.

Tariffs and front-loading cloud the outlook

Xu Tianchen, senior economist at the Economist Intelligence Unit, who produced the highest individual forecast in the Reuters poll at 50.4, said the June data showed signs of renewed trade front-loading, with exporters accelerating shipments to the United States ahead of new Section 301 tariffs scheduled to take effect from late July. That dynamic, layered on top of earlier front-loading driven by Middle East-related price increases, appears to be fading as overseas buyers draw down existing inventories while awaiting clarity on a potential regional ceasefire.

The picture leaves Chinese manufacturers increasingly dependent on a reopening of demand from the United States, a prospect that received no meaningful boost from a May meeting between US President Donald Trump and Chinese leader Xi Jinping. That meeting produced no breakthroughs on tariffs, leaving both the trade relationship and the broader geopolitical backdrop unresolved heading into the third quarter.