PMI points to continued yet easing downward pressure on the manufacturing sector in 2Q25
Our observations
• Large and medium enterprises recover while small enterprises continue to contract.
• Manufacturing output resumes expansion since May.
• Overall market demand starts to stabilize.
• Manufacturers lower ex-factory prices of their products amid falling input prices.
• Employment in manufacturing sector slightly decreases.
Policy outlook
• A meeting of the Political Bureau of the Communist Party of China Central Committee was held on 25 April. It called for efforts to accelerate the implementation of more proactive and effective macro policies, and to make full use of a more proactive fiscal policy and a moderately loose monetary policy.
• Amid the China–US trade war, we expect the Chinese government to ramp up economic stimulus in the second half of 2025, which will help the economy navigate the challenging external environment.
Our forecasts for 3Q25
• We project a deceleration in the growth in manufacturing production, amid the Trump trade war and the Chinese government’s effort to address overproduction in certain industries.
• Headline PMI will stay below 50.0.
• VAIO growth will decelerate to 5.0% yoy.
• Real GDP growth will slow to around 4.8% yoy.
• Exports will experience a low single-digit year-on-year decline.
• Year-on-year growth rates for the purchaser price index and the PPI will continue to be negative but slightly improve in 3Q25, as the Chinese government has prioritized addressing overproduction in certain industries.