China manufacturing activity falls for the first time in 8 months

But business sentiment slightly improves.

China's manufacturing sector has fallen into contraction, recording a Purchasing Managers' Index (PMI) of 48.3 in May, down from 50.4 in April, marking its first contraction in eight months, according to Caixin China General Manufacturing PMI data.

This was also the lowest PMI recorded since September 2022.

Manufacturing output declined for the first time in 19 months, falling at the fastest pace since November 2022, whilst new orders contracted at the sharpest rate since September 2022.

Export orders also fell for the second consecutive month, dropping to the lowest level since July 2023. This external demand weakness was a primary driver of the overall contraction.

Job cuts accelerated, with employment declining for the eighth time in nine months. Investment product manufacturers were particularly affected by layoffs.

Both input costs and output prices continued declining, with businesses lowering prices to remain competitive amid weak demand.

Despite the challenging conditions, business sentiment improved slightly from April's low, with companies expressing cautious optimism about potential improvements in trade relations and external markets.

Surveyed companies generally believed that the China-US trade conflict would abate in the near term, hopeful that there would be improvements in the external market.

Caixin Insight Group's Dr. Wang Zhe notes that major macroeconomic indicators showed marked weakening at the start of second quarter 2025, with downward economic pressure intensifying significantly compared to previous periods. The report emphasises the need for policy measures focused on boosting domestic demand through improved household incomes and employment conditions.

This data suggests China's manufacturing sector faces substantial headwinds, particularly from weak external demand and ongoing trade uncertainties.