PMI points to a recovery in the manufacturing sector in 1Q25
Our observations
• Large and medium enterprises expand while small enterprises continue to contract but start to stabilize.
• Manufacturing output expands at a relatively rapid pace.
• Overall market demand picks up.
• Manufacturers lower ex-factory prices of their products amid falling input prices.
• Employment in manufacturing sector slightly decreases.
Policy outlook
• The Government Work Report released in March reiterated the policy stance of a more proactive fiscal policy and an appropriately accommodative monetary policy.
• Amid the escalating China-US trade war, we expect the Chinese government to ramp up economic stimulus and announce specific policy details in the coming weeks, which will help the Chinese economy navigate the challenging external environment.
Our forecasts for 2Q25
• We project a marked deceleration in the growth in manufacturing production, amid declining export demand due to the Trump trade war and the resulting slowdown in the global economy.
• Headline PMI will drop below 50.0.
• VAIO growth will decelerate markedly.
• Real GDP growth will fall to 3.5%-4.0% yoy.
• Exports will experience a 10% yoy decline.
• Year-on-year growth rates for the purchaser price index and the PPI will go down, due to a recent decline in global commodity prices as Trump’s tariffs have fuelled concerns about a potential global recession.