Insights 
VT 
China’s National Bureau of Statistics reported a rise in the May 2025 manufacturing PMI to 49.5, up from 49.0 in April. This number remains below 50, showing contraction for the second consecutive month. Large enterprises reached an expanding PMI of 50.7, while medium and small enterprises contracted at 47.5 and 49.3, respectively. The production sub-index expanded to 50.7, whereas new orders slightly rebounded to 49.8. Employment improved but stayed under the threshold at 48.1, and supplier delivery times were neutral at 50.0.
In the non-manufacturing sector, the PMI was 50.3, showing marginal expansion but lower than the expected 50.6. Construction activity decreased to 51.0, and services rose slightly to 50.2. High-performing industries included rail, air transport, postal, telecoms, and IT, all scoring above 55.0, while real estate and capital markets remained below 50. New orders rose but stayed weak at 46.1, with construction and services contributing to this modest increase. Input and selling prices continued to decline, although at a reduced pace. Employment remained weak at 45.5, while business expectations, slightly reduced, stayed optimistic at 55.9. China plans to announce new financial policies in mid-June 2025, amid anticipation of further economic stimulus.
underwhelming momentum in manufacturing
As we digest the May figures from the National Bureau of Statistics, one thing becomes clear: while there’s a glimmer of forward movement, the broader picture is still dampened by underwhelming momentum. The manufacturing PMI, at 49.5, although higher than April’s 49.0, tells us the sector is still shrinking, just at a slower rate. When this index sits below 50, it means general activity is declining. What is instructive here is the divergence between enterprise sizes. Large firms showed improvement — readings above 50 suggest they are growing — whereas medium and smaller groups remain under pressure. This division creates mixed signals across production levels and input demand.
The production sub-index nudging up to 50.7 offers a flicker of optimism, but it was not matched by strong new industrial orders. At 49.8, new orders are still not expanding, although slightly stronger than before. It’s not enough to suggest broad demand is returning. Employment remains poor across the board. At 48.1, the labour figure points to ongoing job losses, albeit less sharply than last month. This nuance is one we cannot ignore. Stronger hiring would be a far clearer sign that recovery is consistent.
Moving away from factories, the non-manufacturing sector is showing some signs of life, but this expansion remains unimpressive. At 50.3, the index is still technically growing, but it missed expectations. When markets forecast 50.6 and we get just above the break-even point, it’s a clear signal that service momentum might be softer than policymakers had hoped. Construction’s dip to 51.0 won’t bring much reassurance either, especially considering how important infrastructure has been to earlier recovery efforts.
divergence in service sector
Digging deeper into the service sector, there is a split between lagging and leading categories. Transport and tech-related fields — such as air, rail, IT, and postal services — are performing well above the line, with scores in the mid-50s. That means strong activity levels. Conversely, real estate and financial services, particularly capital markets, remain weighed down. They are still contracting, and this is before any concrete announcements on credit or fiscal policy are made.
The measure for new orders across the wide service and building sectors increased slightly, but at 46.1 it shows that customers are still holding back. We’re not seeing strong follow-through in demand, and any improvement here appears patchy. Prices for inputs and outputs are still falling, although more gradually. This ongoing price deflation could reflect softer consumption or a reluctance to restock materials, and it’s something to monitor closely moving forward.
Workforce numbers remain a problem for services too. A reading of 45.5 is weak by any yardstick, confirming businesses are not adding to staff counts. Even if intentions are steady, the action has not followed. Despite this, expectations for the future remain high, indicating that firms are hopeful, just not committing yet. The score of 55.9 indicates confidence, but unless new policy shifts actual behaviour, it won’t carry much weight.
From our perspective, the primary takeaway lies in the divergence between sentiment and performance. There’s clearly anticipation of state support. We know that the government has promised further measures. These are expected by mid-June, and there’s likely coordination with monetary or lending targets. Until direct steps are rolled out, traders would be wise to stay focused on real data — not forecasts alone.
Response in equity and rates markets may stay muted until numbers, particularly related to investment and consumption, show tangible improvement. The last few months hint at a fragile upswing, but not one that is durable yet. For now, volatility in certain futures contracts might be telling us that positioning is cautious, until stimulus plans are properly detailed or implemented.
This suggests we must stay alert to updates on infrastructure spend, measures to support private enterprise, and incentives for consumer demand. Watching sector-specific performance, especially in property, services, and logistics, will provide the best short-run clues. There is a pace to these changes, but it remains uneven — and trading strategies should reflect that rhythm.
