Summary of Key Points
In June, China's manufacturing PMI (Purchasing Managers Index) rebounded to 50.3%, returning above the critical threshold of 50%, indicating a slight improvement in economic activity. The non-manufacturing PMI and the composite PMI also rose slightly, suggesting a recovery in overall economic momentum. However, small and micro enterprises remain in a contractionary phase, with their difficulties unresolved. New growth drivers (such as equipment manufacturing and high-tech industries) continue to expand, while the pressure on raw material costs has eased but product prices have declined. In the non-manufacturing sector, demand for infrastructure projects is increasing, and new growth sectors are maintaining strong performance. The future direction of the economy will depend on three key factors: the sustainability of exports, the development of the real estate market, and the effectiveness of policy measures.
Detailed Analysis
1. The Economy Is Finally “Warming Up,” but Small and Micro Enterprises Are Still in a “Cold Winter”
The PMI serves as a barometer for manufacturing activity, with 50% being the dividing line between expansion and contraction. A PMI above 50 indicates growing business, while below 50 suggests a contracting economy. In June, the manufacturing PMI rose to 50.3%, up 0.3 points from the previous month, indicating more factory orders and increased production activity. The non-manufacturing PMI (including services and construction) and the composite PMI also showed improvement, suggesting an overall economic recovery.
However, small and micro enterprises are still struggling: their PMIs are mostly below 50, indicating that production, orders, and purchasing volumes are significantly lower than those of larger companies. This indicates that the drivers of economic growth have not yet reached all sectors, particularly affecting small businesses, which need more policy support. Experts recommend increasing government investment in infrastructure projects to boost business orders and help these enterprises thrive.
2. New Growth Drivers Are Leading the Way
In June, the equipment manufacturing and high-tech manufacturing sectors performed exceptionally well:
- The equipment manufacturing PMI (e.g., automotive and machinery) reached 52.5%, rising for four consecutive months, due to strong demand driven by major projects in transportation and energy infrastructure;
- The high-tech manufacturing PMI (e.g., artificial intelligence-related industries) also rose to 53.5%, with production, domestic orders, and export orders all above 52%. These sectors are driving China's high-quality economic growth and represent the engine of innovation.
3. Raw Material Costs Have Decreased, but Product Prices Have Also Fallen
There is a paradox in June:
- Reduced Cost Pressure: International oil and metal prices have declined, reducing the cost of raw materials for businesses (the purchase price index fell by 6.3 percentage points), indicating that fewer companies are facing high costs;
- Falling Product Prices: The ex-factory price index dropped to 48.2%, meaning that companies are selling products at lower prices. This is particularly evident in basic raw material industries (such as steel and cement) and consumer goods manufacturing (such as clothing and food). However, product prices in equipment and high-tech manufacturing sectors remain stable, indicating strong competitiveness.
This situation may squeeze corporate profits, especially in traditional industries, which require attention.
4. Non-Manufacturing Sector: Infrastructure Projects Are Boosting the Economy, while New Growth Drivers Continue to Thrive
The non-manufacturing PMI rose to 50.2%, although only by 0.1 percentage points, with several positive developments:
- Infrastructure Projects are Accelerating: The construction industry (e.g., road building and bridge construction) has seen a significant improvement in activity, with orders finally returning above 50% after 11 months of contraction. This is due to the initiation of major projects, which will support future economic growth;
- New Growth Drivers Remain Strong: The PMIs for internet and software services have risen for four consecutive months, and the telecommunications industry has also maintained a high level of expansion (above 55%). The vitality of these information services sectors reflects China's ongoing innovation drive, which is crucial for improving economic efficiency.
5. The Future Economy Depends on Three “Key Variables”
Experts predict that the future trajectory of the manufacturing PMI will be influenced by three factors:
- Sustainability of Exports: The global AI investment boom could boost exports of related products, but international geopolitical tensions (e.g., trade disputes) remain a concern;
- Real Estate Market Trends: The real estate sector is an important part of the economy. If the market stabilizes, it will drive demand in related industries;
- Policy Measures in the Second Half of the Year: The pace and effectiveness of growth-stabilizing policies (e.g., increased infrastructure investment and consumer stimulus) will directly affect economic recovery.
Overall, there are signs of economic improvement in June, but additional policy support is needed, especially to assist small and micro enterprises. Relying on new growth drivers and infrastructure projects will be crucial for sustained economic growth. Ordinary people can monitor indicators such as the number of factory orders and the progress of infrastructure projects to understand the real state of the economy.