China's Split Recovery: Factories Roar to 5-Year Highs While Services Slump

With the Caixin Manufacturing PMI rising to 52.2 in April 2026—its highest reading in over five years and a significant increase from 50.8 in March—China's manufacturing industry is running on all cylinders. This follows an already strong February number of 52.1, which was the fastest increase in factory activity since December 2020 driven by strong local and export demand, rising producer confidence, and government aid programs. Official PMI statistics show the recovery is still uneven across the wider industrial scene and indicates a concentrated boom rather than a broad-based manufacturing renaissance even if the Caixin survey points to a fast and strong return to development.

The services industry, on the other hand, is losing ground quickly. The Caixin Services PMI dropped to a nine-month low of 50.6 in June 2025, missing projections of 51.0 and declining from May's 51.1. Although the industry has essentially grown for some 18 to 30 straight months, the impetus is clearly slowing as weak domestic demand, declining export orders from important trading partners, and a delicate US-China trade truce weigh on new business. The post-reopening recovery has mostly vanished, which means trade-dependent and consumer-facing service sectors are fighting to find new growth drivers.

China's strong factories and struggling services sector define an unequal, manufacturing-led recovery. The Caixin Composite PMI rose to 51.3 in June 2025 from 49.6 in May, maintaining total activity in expansion territory, but the gap between manufacturing strength and services fragility remains the Achilles' heel for the economy. With ongoing headwinds from sluggish domestic consumption, slowing world export demand, and unsolved trade conflicts with Washington, Beijing has to turn its factory-floor momentum into a more robust, broad-based economic recovery or risk seeing the manufacturing shine fade against a still-weak service background.