In April 2025, China’s manufacturing sector experienced its most significant contraction in 16 months, highlighting the mounting challenges facing the world’s second-largest economy. The official Purchasing Managers’ Index (PMI) fell to 49.0, down from 50.5 in March, signaling a contraction in factory activity. This downturn is attributed to a combination of factors, including aggressive U.S. tariffs, declining export orders, and subdued domestic demand.

The recent imposition of 145% tariffs on Chinese goods by the U.S. has had a profound effect on China’s export-driven manufacturing sector. These tariffs have led to a significant drop in new export orders, as American importers delay or cancel orders in response to increased costs. The uncertainty surrounding trade relations has further dampened business confidence, with many manufacturers expressing concerns about the sustainability of their operations under the current trade climate.

April saw a sharp decline in new export orders, marking the steepest drop since July 2023. This decline reflects the immediate impact of the U.S. tariffs and the broader challenges in global trade. Manufacturers are struggling to find alternative markets to offset the loss of U.S. demand, leading to reduced production levels and increased inventory.

Beyond external pressures, China’s domestic demand remains weak. The prolonged property crisis has eroded household wealth and consumer confidence, leading to reduced spending. Additionally, local governments are grappling with significant debt burdens, limiting their ability to stimulate economic activity. These factors contribute to a challenging environment for manufacturers, who are facing both declining exports and tepid domestic demand.

In response to the economic slowdown, Chinese policymakers have pledged to implement supportive measures aimed at stabilizing the economy. These include fiscal stimulus, monetary easing, and targeted support for affected industries. However, analysts remain cautious about the effectiveness of these measures, given the structural challenges facing the economy. The International Monetary Fund has revised China’s 2025 growth forecast down to 3.5%, below the government’s target of around 5%.

As China navigates these complex challenges, the manufacturing sector’s performance will be a critical indicator of the broader economic trajectory. The combination of external trade pressures and internal demand weaknesses underscores the need for comprehensive policy responses to support sustained economic growth.

(Adapted from Euronews.com)