China’s manufacturing sector expanded in June for the first time in three months, according to a private-sector survey released Tuesday, signaling a modest recovery in domestic demand even as export pressures persist.
The Caixin/S&P Global Manufacturing Purchasing Managers’ Index (PMI) rose to 50.4 in June from 48.3 in May, exceeding expectations in a Reuters poll and surpassing the 50-point mark that separates growth from contraction.
The upbeat Caixin reading stands in contrast to the official government PMI released a day earlier, which showed manufacturing activity shrinking for the third consecutive month. The divergence suggests a mixed recovery, with private firms potentially seeing stronger improvement than larger state-owned enterprises.
“Overall, manufacturing supply and demand recovered in June,” said Wang Zhe, senior economist at Caixin Insight Group. “However, the external environment remains severe and complex. The issue of insufficient effective demand at home has yet to be fundamentally resolved.”
The survey indicated that new domestic orders increased in June, buoying production to its highest level since November 2024. Factory executives cited improved trade conditions and marketing promotions as key factors driving the rebound.
However, export demand remained weak. New export orders contracted for a third straight month, reflecting global trade uncertainties and continued pressure on China’s outbound shipments. Rising shipping and logistics costs also pushed up export prices, even as domestic output charges fell at the fastest pace since January.
Employment within the manufacturing sector declined again in June, with firms reporting job cuts and resignations. Some small exporters resorted to selling at a loss or cutting wages to survive.
Despite the uptick in activity, business confidence dipped compared to May and remained below long-term averages. Economists caution that the recovery is fragile and uneven, with structural challenges such as overcapacity and soft consumer demand still weighing on the sector.
Goldman Sachs analysts noted that major stimulus is unlikely from the upcoming July Politburo meeting, suggesting that policymakers may remain cautious amid signs of gradual improvement in overall economic performance.
The Caixin data follows recent positive developments in U.S.-China trade ties. Last week, U.S. Treasury Secretary Scott Bessent confirmed the two countries had resolved disputes over the shipment of Chinese rare earth minerals, a key sticking point in bilateral trade negotiations. China’s Commerce Ministry said export license applications for controlled items will be processed in accordance with existing laws.
While domestic factory momentum shows signs of life, external demand and weak global trade conditions continue to pose significant risks to China's industrial recovery in the second half of 2025.
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