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China Manufacturing Revival May Put an End to New Stimulus
By wchung | 03 Jun, 2025
China’s manufacturing activity is picking up enough steam from an earlier slowdown this year to put an end to talk of further stimulus measures, according to economic analysts.
A preliminary reading Wednesday of HSBC’s monthly purchasing managers’ index rose to a three-month high of 49.1 points. Anything below 50 suggests contraction but the index was a significant improvement over the 47.9 posted in September.
What gave more significance to the PMI reading was the fact that it comes on the heels of healthy upticks in three key leading indicators — retail sales, new investments and exports — that appear to suggest that the three-and-a-half-year low of 7.4% growth logged in the third quarter is likely to have been the low-water mark for China’s economy.
The preliminary reading is based on responses from 85 to 90 percent of the 420 companies surveyed each month by HSBC and is generally a highly accurate preview of the final PMI to be released on November 1. While the bank sounded a cautionary note due to a weak market for white-collar jobs, but anecdotal evidence of the surging demand for blue-collar workers suggest the rebound is real and likely to be sustained.
Another reason for optimism about China’s recovery is that the 6-month-long downturn was largely a creature of Beijing’s efforts to cool overheating in the real-estate market. The rapid urbanization of China’s 650 million rural population provides plenty of fodder for growth for at least the coming decade or two, especially in light of a new central government push to shift growth to domestic consumption and away from reliance on exports.
In an effort at partially reversing its earlier cooling moves, Beijing has cut interest rates twice since early June and has infused more liquidity through heavy investments by state firms and massive infrastructure projects like high-speed railroads, regional airports and improved highways.
With a 14.4% rise in retail sales, 23% jump in business investments and a 9% growth in exports, the rising optimism suggested by the latest PMI is likely to improve even more through the rest of the year, especially with holiday season demand picking up. Another good indicator of an upturn in consumer sentiment is the estimated 20% surge in travel-related spending during the recent 9-day Mid-Autumn Festival national holiday period.
The latest data have prompted analysts to revise China’s growth forecasts back up to the 8-8.5% range after having revised them down to the 7.5% range during the summer. The return to growth that’s high enough to ensure domestic stability is likely to mean a curtailing new stimulus measures to avoid a return to the bubble that had been taking shape through mid-2011.
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