China factory activity contracts to 49.2 in July, ending expansion

China’s official manufacturing purchasing managers’ index dropped to 49.2 in July 2026 from 50.3 in June, ending a four-month expansion streak, the National Bureau of Statistics reported on July 31. Economists had forecast a reading of 50.0; the print was the weakest since February.

The world’s second-largest economy grew 4.3% in the second quarter from a year earlier, the slowest pace in more than three years and below the lower end of the full-year target of 4.5% to 5%. Exports, a reliable growth engine, are now faltering: a China Beige Book survey found that U.S.-bound shipments fell outright for the first time in several months.

Manufacturing employment posted its worst performance, with job growth deteriorating across all sectors compared with a year earlier, the survey showed.

The July slump reverses a surge in June, when overall exports jumped 27%—the fastest in nearly five years—as businesses rushed orders ahead of anticipated U.S. tariff increases. The frontloading waned after a 10% broad-based duty from President Donald Trump’s Section 301 probes expired on July 24.

Retail sales weakened in July from both the previous month and a year earlier, with travel and restaurants suffering a sharp downturn, China Beige Book found.

The data landed one day after top policymakers at a mid-year meeting on July 30 acknowledged “difficulties and challenges facing the economy” and pledged to accelerate fiscal spending and implement “incremental policies” to support growth in the second half.