context: The PRC's manufacturing sector remains caught in the crossfire of an escalating US–PRC trade war that has fundamentally disrupted production patterns and global supply chains. High US tariffs and Chinese retaliatory measures have forced manufacturers to redirect export-grade inventory to oversaturated domestic markets, accelerating deflationary pressures as companies slash prices to survive. The manufacturing PMI's volatile performance reflects this structural challenge, as exporters struggle with collapsing overseas demand while domestic consumption remains weak. With supply chains fragmenting through 'China Plus One' strategies and Beijing urging a domestic pivot to absorb displaced exports, Chinese manufacturers face external demand destruction and internal market saturation that has contributed to persistent producer price deflation.
Wang Zhe 王喆 Caixin senior economist reports June 2025 manufacturing PMI reached 50.4, rising 2.1 percentage points from May to return to expansion territory for the eighth time in nine months.
- manufacturing supply and demand recovered with production and new orders both returning above 50 following May's brief contraction
- trade environment improved slightly with companies adopting promotional measures, though export orders remained below 50 for third consecutive month due to consumer goods export pressure from tariff policies
- employment continued declining for the ninth time in the past ten months as companies prioritised cost reduction, with consumer goods manufacturers showing steeper workforce cuts than investment and intermediate goods producers
- prices remained weak with input costs falling for fourth consecutive months and output prices declined for the seventh straight month to a near five-month low due to intense market competition
- supplier delivery times extended slightly for fourth consecutive month reflecting supply chain tightening, while companies reduced purchasing volumes to lowest since October 2024
- business confidence in future operations weakened compared to previous month despite remaining in expansion territory
- National Bureau of Statistics manufacturing PMI also rose to 49.7 percent in June, up 0.2 percentage points, while non-manufacturing business activity index reached 50.5 percent, both reflecting gradual economic recovery momentum