Insights 
VT 
China’s Caixin Manufacturing PMI fell to 48.3 in May 2025, marking its lowest level since September 2022 and indicating the first contraction in eight months. This figure contrasts with expectations of 50.7 and the prior 50.4. Simultaneously, the official manufacturing PMI rose slightly to 49.5, still in contraction, but better than the previous 49.0.
Manufacturing output and new orders declined, with export orders reaching their weakest since July 2023. Employment, particularly in investment goods, shrank rapidly, while input and output prices continued to drop. Supplier delays were minimal, with stable inventories due to reduced purchases, and business confidence slightly increased due to optimistic external conditions.
NBS And Caixin PMI Overview
The NBS PMI focuses on large state-owned enterprises across broader sectors. This official index, compiled by a government agency, reflects policy-driven economic stability. Caixin PMI, a private index, concentrates on small to medium-sized enterprises sensitive to market demands and external shocks, offering a view of the private sector.
Both PMIs are released monthly, providing insights into different segments of China’s economy. NBS PMI gives a macroeconomic perspective, while Caixin PMI highlights market-driven industries, aiding in understanding China’s economic landscape.
The recent readings in both indices point clearly to a wider problem in activity levels across the sector. With the Caixin PMI dropping below 50, it’s not just a slowdown—this signals outright contraction, and not a mild one at that. The lowest figure since late 2022 was not expected, compounded by the sharp fall in new orders both internally and, more worryingly, in overseas markets. Export demand hasn’t been this soft since the middle of last year, which highlights that external appetite is faltering. There’s a broader message in that alone.
Employment And Economic Indicators
The official gauge, the NBS measure, did edge up slightly, but it remains firmly below the neutral 50 mark. That uptick might seem encouraging on the surface, but it becomes less so when viewed in the context of overall persistent weakness. It’s clear firms, especially those exposed to global trade, are facing both demand-side pressures and sustained pricing weakness. Lower input and output prices aren’t just a reflection of easing costs—they hint that firms are trimming prices to hold onto orders.
From our perspective, the divergence in employment across sectors is telling. Accelerated job shedding in investment goods suggests capital spending may be drying up. That category is often seen as an early signal of sentiment on future industrial growth, and its contraction should not be brushed aside. The manufacturing pulse is losing rhythm faster than larger firms in the headline indicator might imply.
Inventory management tells us another piece of the story. Firms are not building stock; they’re responding to weaker orders by holding steady on input purchases. That kind of passivity in supply chains, particularly when delivery times aren’t worsening, tends to happen when companies aren’t expecting any short-term improvement.
While some were encouraged by the small bump in business sentiment, it’s a modest bright spot in an otherwise soggy picture. A slight lift in confidence may reflect hope rather than firm expectations. It’s not uncommon to see optimism rise after long stagnation—but hope isn’t momentum.
We are not ignoring that the discrepancies between the two indices are common and still offer useful distinctions. One tracks state-linked, policy-insulated firms, while the other reflects nimble, market-driven businesses. When those smaller firms—which often respond faster—begin to retreat, that movement deserves attention, particularly by those positioning around forward-looking trades.
Staying close to these kinds of inputs over the coming sessions will be important, especially for those aligning positions based on industrial activity and external demand trends. It’s less about lagging reads and more about the implications of weaker employment, falling prices, and thinning order books for firms that don’t have the cushion of government linkage.
We should expect responses that either support demand or soften credit restrictions, but any delay in those measures could continue to reverberate across asset pricing. The short end of positioning might benefit most in this kind of muted demand scenario if volatility holds. Longer duration exposure will need careful balancing, as the downward pull on prices and the broader lack of momentum could test resilience.
