China’s manufacturing sector continued its downward slide in August 2025, contracting for the fifth consecutive month, according to an official survey released on August 31. The country’s official Purchasing Managers’ Index (PMI) for manufacturing inched up to 49.4 in August from 49.3 in July, but remained below the 50-point threshold that separates expansion from contraction. The result missed the median forecast of 49.5, underlining persistent challenges for the world’s second-largest economy as it grapples with a host of domestic and international headwinds.
According to Reuters, the PMI data reflects a manufacturing sector still searching for momentum. While the slight uptick in the headline figure suggests the pace of contraction is slowing, the fact that the index has languished below 50 for five months underscores the difficulties facing Chinese producers. The indices for new orders and raw material inventories showed modest improvement, but the employment sub-index declined slightly, signaling ongoing job insecurity within the sector. This is particularly concerning given that manufacturing remains a crucial pillar of China’s economy.
The property sector downturn continues to weigh heavily on economic sentiment. As AP reports, the prolonged slump in real estate—a key store of household wealth in China—has dampened consumer confidence and spending. The situation has been further exacerbated by a recent ruling from China’s top court, which bans firms and employees from skirting social insurance payments. While this move aims to support cash-strapped local authorities and replenish depleted pension coffers, it could also lead to job losses, as many companies and workers are already struggling to make ends meet.
Urban unemployment edged up to 5.2% in July from 5% in June, official data shows. At the same time, July’s bank lending data revealed an unexpected contraction—the first in 20 years—reflecting households’ reluctance to take out new mortgages and invest in property. Profits at China’s industrial firms fell for a third straight month in July, highlighting the impact of subdued demand and persistent factory-gate deflation.
Compounding these domestic challenges are international pressures, most notably the ongoing trade tensions with the United States. Earlier in August, the U.S. and China agreed to extend their tariff truce for another 90 days, maintaining levies of 30% on Chinese imports and 10% on U.S. goods. Despite this pause, uncertainty over the future of tariffs continues to loom large. According to IndexBox and AP, this uncertainty is eroding business confidence on both sides of the Pacific, with Chinese exporters scrambling to grow market share in Southeast Asia in what some producers have described as a “mad rat race.”
Adding to the woes, China has been battered by extreme weather in recent months. Torrential seasonal rains and resulting floods have disrupted business activity in several regions, causing $2.2 billion in road damage since July 1, 2025. These disruptions have not only hampered logistics and supply chains but also further dampened economic sentiment.
Despite the gloomy headlines, some glimmers of hope have emerged. The non-manufacturing PMI, which covers services and construction, expanded at a quicker pace, rising to 50.3 in August from 50.1 in July, according to the National Bureau of Statistics (NBS). The composite PMI, which blends manufacturing and non-manufacturing activity, climbed to 50.5 in August from 50.2 in July. Senior NBS statistician Zhao Qinghe noted, “Manufacturing, non-manufacturing, and overall PMI all saw growth in August, signaling improved economic sentiment.”
Still, economists remain cautious. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, told Reuters, “The macro outlook in the rest of the year largely depends on how long exports can stay strong and whether fiscal policy will become more supportive in Q4.” While July exports beat forecasts, this was largely due to a low base and a surge in shipments to Southeast Asia, rather than a fundamental improvement in global demand.
China’s Ministry of Commerce has underscored the importance of international cooperation in shoring up economic prospects. In late August, China’s international trade representative Li Chenggang visited the U.S. for talks with American officials, focusing on implementing the consensuses of state leaders and discussing trade and economic ties. The ministry emphasized that both sides should adhere to “the principles of mutual respect, peaceful coexistence, and win-win cooperation,” and manage differences through equal dialogue. Li also met with business representatives during his trip, aiming to reassure global partners about China’s commitment to open trade.
Meanwhile, policymakers in Beijing have ramped up consumer subsidies in an effort to stimulate spending. However, the persistent property slump continues to crimp household consumption, with many families wary of taking on new debt amid falling home values and rising job insecurity. Local governments, already heavily indebted and deprived of land-sale revenue, face mounting demands on public finances—not least from infrastructure repairs necessitated by recent extreme weather events.
Looking ahead, analysts polled by Reuters forecast the private sector RatingDog PMI to come in at 49.7, up from 49.5 a month prior. This data, set to be released on Monday, will offer further insight into the health of China’s manufacturing sector and whether the modest improvements seen in August can be sustained.
For now, the mood among Chinese manufacturers remains cautious. The combination of weak domestic demand, trade uncertainty, a sluggish property market, and external shocks like severe flooding has created a challenging environment for growth. As the year progresses, all eyes will be on Beijing’s policy response and the resilience of China’s export sector in the face of ongoing global turbulence.
Despite a few positive signals—such as the uptick in non-manufacturing activity and government efforts to foster international cooperation—the challenges facing China’s economy are formidable. The next few months will be critical in determining whether the country can regain its economic momentum or whether further stimulus and reforms will be needed to keep its ambitious growth targets within reach.
In a period of mounting uncertainty, one thing is clear: China’s economic path forward will be keenly watched by policymakers, investors, and businesses around the globe.
