China’s manufacturing sector saw an unexpected rebound in June, offering a glimmer of hope for the economy as factories showed renewed signs of life despite ongoing trade tensions and weak demand. A private survey released on Tuesday revealed that manufacturing activity moved back into expansion, marking a welcome shift after recent softness.

The Caixin and S and P Global manufacturing purchasing managers index rose to 50.4 in June, up from 48.3 in May. This result, which beat market expectations, suggests the sector grew modestly after contracting the month before. It was also the eighth time in the past nine months that the index remained in expansion territory.

The improvement was largely driven by stronger production and a slight uptick in domestic orders. Businesses benefited from more favorable trade conditions and promotional campaigns that helped boost activity.

Interestingly, the positive reading from the Caixin survey stood in contrast to official government data published a day earlier, which indicated that manufacturing activity had declined for a third straight month. Analysts noted that the difference may stem from timing and the types of companies surveyed. The Caixin index focuses more on smaller, export-oriented firms, while the official data captures a broader range of large industrial businesses.

Still, the overall picture remains mixed. Export orders continued to fall for the third month in a row, highlighting persistent pressure on overseas demand. Shipments to the United States have dropped significantly this year, pushing many exporters to explore alternative markets in Southeast Asia and the European Union.

Hiring trends also remained weak, with manufacturers hesitant to bring on new workers. Many companies continued to prioritize cost control, especially those in the consumer goods sector. This led to reduced staffing and a growing backlog of unfinished work.

Intensified price competition has further eroded profit margins, forcing many businesses to lower prices in order to maintain sales. Business sentiment has cooled somewhat, with concerns about the external environment and a lack of strong domestic demand still weighing on outlooks.

Despite these challenges, manufacturing continues to play a key role in China’s economy, accounting for about one quarter of national output. To stay ahead of potential tariffs and disruptions, some exporters have rushed shipments before the current trade pause with the United States expires in mid August.

Recent developments point to a possible thaw in relations between Beijing and Washington. The two sides have agreed to move forward on the next steps under an existing trade framework. As part of that progress, China last month added two substances used in fentanyl production to its list of controlled chemicals, following a high-level meeting with American officials.

While uncertainty remains, the latest data suggests that Chinese factories are finding ways to adapt. As global trade dynamics continue to shift, manufacturers are doing their best to stay competitive and resilient.