China’s manufacturing activity took an unexpected hit in May 2025, marking its steepest decline since September 2022.
The Caixin/S&P Global manufacturing PMI fell to 48.3, signalling contraction for the first time in eight months. This downturn comes as U.S. tariffs begin to weigh heavily on Chinese exports, dampening global demand and disrupting supply chains.
The latest data reveals that new export orders shrank for the second consecutive month, hitting their lowest level since July 2023.
Factory output also contracted for the first time since October 2023, reflecting the broader economic slowdown. Analysts attribute this slump to the reinstatement of sweeping U.S. tariffs, which were briefly halted before being reimposed by a federal appeals court.
Despite a temporary trade truce between the U.S. and China, tensions remain high, with both sides accusing each other of violating agreements.
The uncertainty surrounding trade policies has led Chinese manufacturers to cut jobs at the fastest pace since the start of the year, further exacerbating economic concerns.
China’s Premier Li Qiang has hinted at new policy tools, including unconventional measures to stabilise the economy. However, with tariffs set to remain high and structural challenges persisting, experts predict continued pressure on China’s industrial sector.
As the world’s second-largest economy grapples with these headwinds, the coming months will be crucial in determining whether Beijing can implement effective strategies to counteract the impact of tariffs and restore manufacturing momentum.
Caixin/S&P Global manufacturing PMI survey
The report was based on the Caixin/S&P Global manufacturing PMI survey, which is a private-sector survey that tracks China’s manufacturing activity.
This survey is conducted mid-month and covers over 500 mostly export-oriented businesses, making it distinct from China’s official PMI, which samples 3,000 companies and is compiled at month-end.
The Caixin PMI tends to focus more on small and medium-sized enterprises, whereas the official PMI aligns more closely with industrial output.
In May, the Caixin PMI fell to 48.3, marking its first contraction in eight months. The decline was largely driven by shrinking new export orders, which hit their lowest level since July 2023.
The survey also showed that employment in the manufacturing sector declined at the fastest pace since January, reflecting the broader economic slowdown.
One key difference between the Caixin PMI and the official PMI is their timing. The Caixin survey is conducted earlier in the month, meaning it may not fully capture policy changes or trade developments that occur later.
For example, economists noted that the effect of the tariff de-escalation in mid-May may not have been reflected in the Caixin PMI results
