China’s manufacturing activity likely contracted for a third consecutive month in June, according to a Reuters survey released Friday, as exporters await a more lasting resolution to the fragile trade truce with the United States in hopes of boosting shipments to one of their key markets.
A poll of 17 economists conducted by Reuters projects the official manufacturing Purchasing Managers’ Index (PMI) will rise slightly to 49.7 in June from May’s 49.5. However, it would still remain below the 50-point mark that indicates expansion, signaling continued contraction.
Domestic demand remains weak, hampered by an ongoing real estate crisis that has curtailed consumer spending and heightened deflationary pressure. Analysts say manufacturers are largely sitting on unsold goods, holding out for potential breakthroughs in trade negotiations between Beijing and its major partners, including the U.S. and EU.
However, China’s leadership faces pressure to ensure that its massive industrial base doesn’t stall, especially with the country aiming to meet its 2025 GDP growth target of “around 5%.”
Separate figures from the National Bureau of Statistics released Friday showed industrial profits declined 9.1% year-on-year in May, marking a return to contraction. Officials cited weak demand and falling factory-gate prices as key reasons for the drop.
Premier Li Qiang, speaking at both the World Economic Forum and an Asian Infrastructure Investment Bank event this week, expressed confidence that China can continue implementing its economic transformation—shifting from an industrial-led model toward consumer-driven growth—while maintaining robust overall momentum.
Still, economists caution that this kind of structural shift will take time and may dampen economic performance in the near term.
Although China and the U.S. have agreed on a framework for a trade agreement, many analysts expect elevated U.S. tariffs to remain in place, sustaining pressure on Chinese exporters and pushing policymakers to either stimulate domestic demand or diversify trading partners.
In the same Reuters survey, economists forecast that the Caixin private manufacturing PMI will rise to 49.0 in June, up from 48.3 in May. The Caixin data is due for release on July 1.
