China’s manufacturing sector continues to face challenges as the Purchasing Managers’ Index (PMI) has remained below the critical threshold of 50 since April. The official manufacturing PMI dipped into contraction territory for six consecutive months, from April to September. This decrease underscores the mounting economic realities we are all experiencing. In September, the PMI did rise a little to 49.8. Yet, this number still indicates a contraction in the sector.
Analysts argue that the PMI figure of 49.3 has come to act as a more accurate marker for painting expansion versus contraction. This would be a big change from the previous threshold of 50. Analysts Hunter Chan and Moriarty Lam state, “Based on data for the past five years, a headline manufacturing PMI reading of 49.3, rather than 50, appears to be a more appropriate dividing line between expansion and contraction, in our view.”
Second, China’s industrial output has proven surprisingly resilient. Even with contractions in the PMI indicating a downturn, it still managed to grow by 6.2% year-on-year through the first eight months of 2025. National manufacturing purchasing manager indices (PMI) show that the manufacturing sector might be shrinking. Yet, despite those high-profile closures, overall industrial output is booming and still rising.
In industrial production, seasonally adjusted month-on-month growth has been consistently positive, raising hopes that a recovery is taking hold, at least in the months to come. As a result, the share of high-tech manufacturing in China’s total industrial production has hit an all-time high. That trend has persisted into the first half of 2025. Likewise, equipment manufacturing has grown by 20,000 jobs in tandem, showcasing the country’s commitment to innovation and advanced manufacturing.
Recognizing the pivotal role that innovation plays, China’s government is aggressively supporting innovation and a green transformation of its industrial sector. While these short-term PMI numbers may say otherwise, these initiatives will boost productivity and sustainability and ensure long-term dividends.
Given the headline PMI of 49.8 in September, suggesting further room for strong month-on-month industrial production growth, there is still hope that a sustained recovery could be underway. Analysts remain cautiously optimistic that as China navigates through these economic challenges, the structural improvements and initiatives being implemented could lead to an eventual turnaround in the manufacturing sector.