China’s manufacturing sector continues to face challenges, with activity shrinking for the third consecutive month in June, albeit at a slower pace. The latest survey indicates that while there are improvements in new orders, purchasing volumes, and supplier delivery times, overall business sentiment remains weak.
Factors such as U.S. tariffs under President Donald Trump and persistent issues in the property sector are prompting calls for additional stimulus measures. The National Bureau of Statistics reported a slight increase in the purchasing managers’ index (PMI), which rose to 49.7 in June from 49.5 in May, aligning with market forecasts.
Despite this uptick, the index remains below the critical 50-point threshold, indicating ongoing contraction. Senior economist Xu Tianchen from the Economist Intelligence Unit noted that the month marked the first full period without Trump’s significant tariffs, which has contributed to slight optimism in trade activities.
While new export orders have been contracting for 14 months, there were signs of domestic recovery, with new domestic orders rising to 50.2 from 49.8. On the other hand, employment figures continue to decline, which raises concerns about long-term economic health.
Zichun Huang of Capital Economics acknowledges the recent improvement while cautioning that ongoing tensions with the West may continue to constrain exports. The non-manufacturing PMI also showed modest growth, reaching 50.5 as construction activity improved.
Nonetheless, uncertainty among factory owners persists, putting pressure on policymakers to enhance support in anticipation of a more stable trade environment. With profits at industrial firms dipping due to weak demand, the government must avoid stagnation in the manufacturing sector to meet its ambitious growth targets.
Economists suggest that as changes fan out from a manufacturing to a consumer-driven economy, a temporary economic slowdown is likely. With the expectation of further stimulus, fiscal spending on infrastructure projects may emerge as essential in maintaining growth and achieving this year’s goals.