6th August 2025: July PMI

RUI: Data released by the National Bureau of Statistics at the end of last month showed that manufacturing activity in China went into a fourth consecutive month of contraction in July. At the same time, growth in the non-manufacturing sector—comprising services and construction—decelerated to the slowest level since last November.

MARIANN: The official manufacturing purchasing managers’ index, or PMI, stood at 49.3 points in July – the lowest level recorded since April. Readings below 50 points indicate contraction.

The decline in overall activity was propelled by a sharp drop in new orders, with demand slipping back into contraction territory after a brief expansion in May. A persistent fall in export orders continued and even accelerated during the past month.

The non-manufacturing PMI stood at 50.1 points, as growth in construction activity slowed and services activity stagnated in July amid declining demand.

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RUI: Private surveys conducted by S&P Global—formerly in collaboration with Caixin—showed a similar picture of China’s manufacturing activity, with the S&P Global China General Manufacturing PMI dropping to 49.5 points in July. Service sector activity fared better, expanding at the fastest pace since May.

MARIANN: Much as the official PMI data did, S&P Global’s findings also linked the drop in manufacturing activity to a slowdown in growth of new orders, which was shown to result in a scaling back of production.

Services PMI, meanwhile, came in at 52.6 points for July, up from the previous month. The expansion in July marks over two and a half years of continuous growth in services activity. Service prices rose for the first time since January and services firms expanded their workforce, according to data from S&P. The expansion comes on the back of a recovery in export volumes amid a lull in US-China trade tensions. Although service providers do not directly produce tariffed products, they often have goods-sector clients that do.

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RUI: On 1^st August, the National Development and Reform Commission confirmed that an additional 69 billion Chinese yuan in funds for China’s consumer goods trade-in programme would be released for the fourth quarter of the year.

MARIANN: This will complete the 300 billion Chinese yuan in funding from special treasury bonds that was allocated for local governments to implement the trade-in programme throughout 2025. The programme—which subsidises a range of consumer goods, including cars and home appliances—is intended to boost household consumption amidst the ongoing economic slowdown. While policymakers have been conservative with the use of direct-to-consumer subsidies, the trade-in programme—which is intended to help consumers replace outdated and inefficient technology—is an exception. According to the European Chamber’s Business Confidence Survey 2025, China’s economic slowdown remains the top challenge to members’ future business, with the need to boost domestic demand now a high advocacy priority.

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RUI: On 30^th July, the Political Bureau of the Communist Party of China Central Committee held a meeting focused on the country’s economic situation and discussed work priorities for the second half of the year.

MARIANN: The meeting readout includes calls to “regulate disorderly competition” and “promote capacity management in key industries”. Unhealthy competition in some sectors has led to a situation in which companies invest ever increasing resources without generating commensurate returns, a phenomenon sometimes referred to as ‘disorderly competition’ or ‘involution’. Regulating ‘disorderly competition’, as well as overcapacity—two problems that are interlinked—will likely continue to be a priority for policymakers for the rest of the year. During the meeting, it was also confirmed that the fourth plenum—during which the 15^th Five-year Plan will be discussed—will take place in October.

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RUI: On 2^nd August, the State Administration for Market Regulation released new guidelines for fee collection by online platform operators in a move that appears to be intended to reduce unhealthy competition by e-commerce sites.

MARIANN: The guidelines—which are based on China’s Pricing Law and E-commerce Law—further restrict how platforms charge merchants for various services. They also explicitly prohibit platforms from forcing merchants to take part in promotions or sales, a move intended to discourage artificially low prices. E-commerce platforms have been among the most visible examples of ‘disorderly competition’ in China, with an ongoing price war between platforms that has come largely at the expense of individual merchants. Platforms—which control the algorithms that determine how visible a merchant’s products are to consumers—aim to ensure that the sellers they host deliver the lowest prices possible. Amid ongoing official calls to crackdown on various forms of undesirable competition, some platforms have taken steps to protect sellers, but further regulation—such as the amended Pricing Law, which is currently undergoing public comment—is likely necessary to help facilitate a return to healthy, sustainable competition.

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RUI: To celebrate the European Chamber’s 25^th anniversary, we are revisiting a quarter century of advocacy in China through the EU-China Business Chronicle Series, available on our official WeChat account.

MARIANN: In the series, you can read about milestones throughout the Chamber’s history, such as the first Position Paper released in 2001, or the founding of our Shanghai Chapter in 2002.

RUI: If you haven’t already, please follow the European Chamber’s official WeChat account to understand more about the Chamber’s work through the EU-China Business Chronicle Series.

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MARIANN: Thanks for listening, and don’t forget to tune in again next week.

RUI: In the meantime, please find useful links in the episode notes.

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