China's Manufacturing Sector: A Tale of Two Surveys in 2025
China's manufacturing activity in early 2025 presented contrasting data points depending on the survey source, with official government figures initially showing contraction before returning to expansion in March, while a private sector survey indicated robust growth during the same period.
Official Manufacturing PMI Data
The National Bureau of Statistics (NBS) reported that China's official manufacturing Purchasing Managers' Index (PMI) registered 49.0 in February and 50.4 in March. A reading below 50 indicates contraction, while a reading above 50 indicates expansion.
February marked the second consecutive month of contraction, following a reading of 49.3 in January. NBS statistician Huo Lihui attributed the February decline to reduced factory operations and production during the extended Lunar New Year holiday, which ran from February 15 to February 23.
In March, the official PMI rose to 50.4, exceeding economists' forecast of 50.1 from a Reuters poll. Huo Lihui stated that manufacturing activity gathered momentum in March as factories resumed production after the holiday period.
Within the March PMI, sub-indexes for production and new orders expanded, while measures for raw materials inventory, employment, and delivery time remained in contraction.
The official non-manufacturing PMI, which covers services and construction, edged down to 49.5 in February before increasing to 50.1 in March. The composite PMI, tracking both manufacturing and services, decreased to 49.5 in February.
Private Survey Data
The RatingDog China General Manufacturing PMI, compiled by S&P Global, reported a reading of 52.1 in February, up from 50.3 in January. This figure represents the highest level since December 2020 and indicates expansion.
Discrepancies between official and private surveys are often attributed to differences in coverage and respondent profiles.
According to the S&P survey, demand for Chinese manufactured goods strengthened in February, with new orders rising for the ninth consecutive month at the quickest pace since December 2020. Output growth reached its strongest level since June 2024. Overseas demand also grew, with new export orders increasing at the most pronounced rate since September 2020.
An anonymous outdoor furniture seller in eastern China reported a 30%-40% increase in orders in January compared to the previous year, with continued growth in February, citing improvements in supply chains and overseas warehouses.
Yao Yu, founder of RatingDog, commented that the manufacturing PMI is expected to maintain a moderate expansionary trend in the short term. The survey also found that Chinese manufacturers expressed higher optimism about future output in February, reaching an 11-month high in overall sentiment.
Despite an increase in backlogs during the Chinese New Year period, employment rose fractionally for the second consecutive month, marking the first such sustained increase since mid-2021.
June PMI Data
By June, the official manufacturing PMI rose to 50.3 from 50.0 in May, exceeding economists' forecast of 50.1. The sub-index for production increased to 51.4, and new orders rose to 51.2. New export orders rebounded to 50.1. The high-tech manufacturing PMI climbed to 53.5, while consumer goods production PMI was 50.2.
The non-manufacturing PMI increased to 50.2 from 50.1, and the construction business activity index edged up to 49.0.
Julian Evans-Pritchard, head of China economics at Capital Economics, stated that external demand and AI-related tech demand were the main drivers of China's growth momentum in June, while real estate services continued to struggle.
According to China Beige Book, a private research firm, manufacturing activity and retail sales showed signs of recovery in June after two months of sluggish growth. Exports benefited from U.S. importers frontloading shipments after a meeting between President Trump and President Xi Jinping in May, and ahead of the expiry of a 10% levy under Section 122 in July.
Economic Context
Economists have noted that China may benefit from a U.S. Supreme Court ruling against emergency tariffs imposed in a previous year. The U.S. Trade Representative's office stated its intention to manage bilateral trade with China for better balance and fairness and to monitor compliance with a trade truce.