Workers manufacturing mobile phone LCD screens within a production workshop at the Jiujiang Economic and Technological Development Zone, Jiangxi Province, March 31, 2025. /VCG
Editor's note: Liu Chunsheng is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinions and not necessarily the views of CGTN.
Overview of China's PMI in May
Against a volatile global economy and rising external uncertainties, China's purchasing managers' index (PMI) data for the manufacturing sector in May provides critical insights into its domestic economy. Released by the National Bureau of Statistics and the China Federation of Logistics & Purchasing, the manufacturing PMI rebounded to 49.5 in May, up 0.5 points from April, still below 50 but showing an upward trend. The non-manufacturing business activity index stood at 50.3, slightly down 0.1 points month-on-month but remaining in the expansionary territory. The composite PMI output index rose 0.2 points to 50.4, indicating an overall economic output expansion.
The rebound has been driven by domestic pro-growth policies, such as the CPC Central Committee's call for stronger counter-cyclical adjustments and the People's Bank of China's financial measures including interest rate and reserve requirement ratio cuts. Improved external environment also played a part, with thawing China-US trade disputes boosting exports to the US and driving new export and import indices up.
Rebound of manufacturing production shows domestic market resilience, with the production index at 50.7. Equipment manufacturing, high-tech manufacturing and consumer goods manufacturing maintained strong or steady growth. Overall demand has stabilized, with the new order index at 49.8. Both large and small enterprises saw improvements, and enterprises' future market expectations rose. These data confirm the domestic market's resilience amid challenges.
A worker engaged in operations at a gas purification equipment manufacturing enterprise in Qingzhou Economic Development Zone, Shandong Province, March 31, 2025. /VCG
Sources of entrepreneurs' optimistic expectations
The high-tech manufacturing PMI has remained above 50 for four consecutive months, staying in the expansionary range. Driven by robust market demand and policy support, industries like AI, new energy vehicles, and biomedicine have seen continuous R&D investment and key technological breakthroughs, gaining ground in both domestic and international markets. High-tech manufacturing has become a new growth engine, boosting entrepreneurs' confidence in China's long-term market prospects.
The government's proactive policies across finance, fiscal work, and industries have bolstered enterprise confidence. Central bank actions such as interest rate cuts, reserve requirement ratio reductions, and provident fund loan rate cuts, along with accelerated fiscal spending, have reduced financing costs and stimulated demand. These measures demonstrate the government's resolve to stabilize the economy and support businesses, reassuring entrepreneurs and maintaining their optimistic outlook on market trends.
China's huge domestic market with 1.4 billion potential consumers and the ongoing new urbanization drive offer enormous growth opportunities. Rising household incomes and consumption upgrades have fueled demand for high-quality products and services. For instance, during the May Day holiday, sectors like tourism, catering, and accommodation saw a surge in activity, with business indices for railway/air transportation and hospitality rebounding significantly. This highlights the domestic market's role as a stable foundation for enterprises, even amid external uncertainties, and reinforces entrepreneurs' optimism about China's economic future.
Workers handling products at a gear manufacturing enterprise in Qingzhou Economic Development Zone, Shandong Province, March 1, 2025. /VCG
Challenges from external uncertainties and countermeasures
Although there were signs of easing in China-US trade tariff disputes in May, US tariffs on Chinese goods remained as high as over 40 percent, severely impacting the price competitiveness of Chinese exports — particularly for labor-intensive industries like textiles, furniture, and machinery and electronics, which have seen compressed profit margins and lost export orders. Meanwhile, weak global economic growth has led to sustained sluggish external demand. Despite a rebound in the new export order index in May, it still stayed in the contraction range at 47.5, indicating persistent downward pressure on exports. The rise of global trade protectionism has also added obstacles to China's expansion into international markets, increasing the uncertainty of external demand.
To tackle these challenges, China is implementing a series of targeted countermeasures. On the domestic front, efforts are focused on stimulating consumption and expanding investment: issuing consumption vouchers, reducing taxes, and accelerating new urbanization to enhance residents' consumption capacity and willingness, while increasing investment in new infrastructure fields such as data centers, and new energy charging piles to drive related industries and lay a foundation for future growth. On the industrial front, the country is promoting restructuring and upgrading by supporting high-tech manufacturing and strategic emerging industries, encouraging enterprises to increase R&D investment, and deepening the integration of traditional industries with new technologies like the internet, big data, and artificial intelligence to achieve digital and intelligent transformation.