China's exports are pulling, but problems persist at home
Summary
- In August, China's private sector Purchasing Managers' Index rose to 51.5, indicating growth in production, while the official PMI remained at 49.8, highlighting a divergence between export-oriented and larger state-owned companies.
- Export-oriented companies have benefited from AI demand and stable growth in major economic areas, whereas larger companies face challenges from the real estate sector.
- China's GDP growth at the start of the third quarter was around 4 percent, below the government's target and slower than the previous quarter, with domestic demand and investments remaining weak.
- The Chinese economy shows a dichotomy, with export and technology sectors supporting growth, but structural issues like weak consumption and real estate problems limiting potential and increasing vulnerability to external shocks.
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Automatic translation: Originally published in Finnish 02/09/2026, 04:19 GMT. Give feedback here.
The dichotomy in China's economy is reflected in the economic figures. In August, the private sector Purchasing Managers' Index rose from 50.9 to 51.5, beating market expectations and showing growth in production for the ninth consecutive month. However, domestic demand is faltering.
The Purchasing Managers' Index compiled by RatingDog differs from the previously published official PMI figure, which remained at 49.8. The difference is explained by the sample: RatingDog's survey focuses on small and medium-sized, export-oriented companies that have benefited from, among other things, demand related to AI, rising prices for technology products, and reasonably stable growth in major economic areas. The official survey, on the other hand, includes larger and state-owned companies that have suffered from problems in the real estate sector, among other things.
China: Official purchasing managers' indices
Source: LSEG
However, exports and the isolated strengths of the technology sector do not conceal the broader economic slowdown. For example, according to Goldman Sachs' estimate, China's GDP grew at an annual rate of around 4 percent at the beginning of the third quarter, which is clearly below the government's target range of 4.5–5 percent and slower than the 4.3 percent seen in the previous quarter. Domestic demand remains subdued, investments are contracting, and problems in the real estate sector continue, which is still reflected in the price trends of housing.
China: New home prices
Source: LSEG
The overall picture for the Chinese economy is therefore twofold: the export industry and technology-related sectors provide support for economic growth and demonstrate the ability of Chinese companies to adapt to external demand, but structural weaknesses – weak consumption, a decrease in investments, and difficulties in the real estate market – limit growth potential. The economic balance relies increasingly on foreign trade at the expense of domestic demand, which makes the economy fragile to external shocks, such as trade policy tensions.
