The day after the meeting of the CCP Politburo, on July 31st, official data released showed that China’s manufacturing Purchasing Managers’ Index (PMI) for July continued to shrink, indicating ongoing contraction in manufacturing operations. Experts believe that this situation is not just a cyclical issue but a sign that the entire economic development model in China is facing challenges, with the country’s exports and manufacturing expected to remain sluggish in the second half of the year.
According to data from the National Bureau of Statistics of China on July 31st, the official manufacturing PMI for July was 49.3, down 0.4 percentage points from June’s 49.7. The non-manufacturing business activity index also dropped by 0.4 percentage points to 50.1.
The PMI readings for both sectors hit their lowest levels since May 2025 and December 2024, respectively, dragging down the overall PMI output index for that month by 0.5 percentage points to 50.2.
The production index fell from 51.0 in June to 50.5 in July, while the new order index dropped from 50.2 to 49.4, and the new export order index declined from 47.7 to 47.1 during the same period.
The PMI data provides a real-time snapshot of China’s economic health and has been below the 50 threshold for four consecutive months, indicating a contraction in China’s manufacturing sector.
In July, China’s official PMI dropped to 49.3, below the median expectation of 49.7 from Bloomberg economists and the 49.8 predicted by economists surveyed by The Wall Street Journal. The non-manufacturing index, which measures construction and service industry activities, also came in lower than expected at 50.1 compared to the anticipated 50.2.
American economist Davy J. Wong told Epoch Times that the drop in manufacturing PMI to 49.3 in July not only fell below previous levels but also market expectations. This continuous contraction over several months reflects a systemic decline in China’s manufacturing industry, with indicators like new export orders showing a broad decline, indicating a cautious outlook and a sense of pessimism among businesses. In other words, the current situation is not just a cyclical issue but a systemic problem in the entire economic development model.
In the summer of 2025, reports emerged of several manufacturing companies in Dongguan, Guangdong province halting operations, giving holidays, or dissolving. On July 14, the well-established Hong Kong-funded enterprise, Yifeng Sports Technology Co., Ltd. in Tangxia Town, Dongguan, issued an internal notice announcing a complete shutdown of its factories and all employees entering a standby status. In July, several foreign-funded and privately-owned enterprises in Dongguan have closed down one after another.
Sun Guoxiang, a professor in the Department of International Affairs and Business at Nanhua University in Taiwan, stated that although the US-China trade war was temporarily halted after the May negotiations in Geneva, the wave of factory closures in Dongguan and the Pearl River Delta indicates that tariffs have structurally impacted China’s exports and manufacturing, which continue to worsen.
Wong indicated that the so-called temporary halt in the trade war is more of a technical respite amid high-level negotiations rather than a substantial structural improvement. The current closures of factories in Dongguan and the Pearl River Delta are not a result of a new round of forex shocks but rather stem from China’s internal system and its international structure going off course, combined with the effects of a decrease in forex economic environment orders.
Tensions between China and the US escalated in April this year, with both sides imposing tariffs exceeding 100% on each other’s imports. In May, they reached an agreement to gradually eliminate most of the additional tariffs within 90 days. This “ceasefire” agreement will expire in mid-August.
After a meeting in Stockholm on July 29th, Chinese and American representatives had differing stances on extending the temporary suspension of imposing tariffs. On the day of the conclusion of the talks, Chinese Ministry of Commerce Vice Minister Li Chenggang announced that China and the US had agreed to extend the period of their tariff “truce,” but US Trade Representative Jamieson Greer later responded by stating that the final decision on whether to extend it would be made by US President Trump.
Despite the Chinese government’s increased efforts to provide subsidies encouraging childbirth, a recent survey by the People’s Bank of China found that Chinese households have become more pessimistic in the previous quarter, with their outlook on the job market hitting an all-time low.
During a Politburo meeting held on July 30th, officials claimed that macroeconomic policies in the second half of the year would “continue to exert force and timely strengthen,” aiming to unlock the potential of domestic demand. However, there was no significant increase in efforts to address overcapacity issues, and no stronger actions against the inward spiral were proposed. The meeting also admitted that the current economic operations still “face many risk challenges.”
The official economic governance rhetoric mentioned in the press release aligns with statements from the CCP Politburo meeting in April or the Central Economic Work Conference at the end of last year.
Sun Guoxiang stated that the signals released by the CCP Politburo meeting were relatively conservative. Unless there is an unexpected intervention from policies or a significant rebound in external demand in the remaining months of this year, China’s overall exports and manufacturing are likely to remain sluggish or show slow recovery.