The heavy investigation S&P Global China General Manufacturing PMI (formerly Caxin Manufacturing PMI) fell below the neutral 50 levels in July (June: 50.4), as manufacturing production fell for the second time since 2023. In the new export orders, a fourth monthly contraction and an output affected by a weak order book sector.
The effects of weakening external demand on the manufacturing sector are affecting the wider economy. Despite efforts to promote Beijing’s domestic consumption, retail sales increased by 3.7% year-on-year in July, below 4.8% increase in June.
Consumer spirit continues to reduce in China’s housing area. Nevertheless, the increased competition in the industrial sector is promoting the cost pressures, which makes manufacturers reduce wages to cut staffing levels or reduce the profit margin. Pure effects can be another weak in consumer spirit and expenses, challenging 5% GDP development target of Beijing.
Stock Market Benefits Mask delicate confidence
Prominent economist Hao Hong commented on consumer spirit trends and efforts to promote consumption of Beijing, stating:
“There is no quick improvement to enhance domestic confidence except stock market rebounds. This is a subject that we are discussing in door meetings closed in economists Beijing.”
Wall Street Source, China waits for a spark
On Monday, August 18, the mainland CSI of China climbed 300 10 months height, while the Shanghai Composite Index hit 10 years old. Despite reaching the new 2025 high levels, CSI 300 and Shanghai Composite Index continue to trade well below their all -time high levels.
In contrast, NASDAQ Composite Index and S&P 500 reached the new record high level in August. American retail sales figures supported the approach of How Hong on consumer spirit and stock market trends. The US retail sales in July increased by 0.5% month after growing 0.9% in June, reflecting strong demand.
Economists divided further on China’s route
However, a slow economy may test the demand for the mainland China-listed shares, which is probably reversed from year-on-year profit. Business development can be important because low tariff price on Chinese goods can reduce the pressure, increase the labor market, and promote wages.
Natix Asia Pacific’s Chief Economist Alicia Garcia Herero shared her views on China’s economic approach and said:
“In the first half, the outperform of the economy sets up the 5% GDP growth target of the Chinese government, which was determined during two sessions in March, more realistic. More especially, the third and fourth quarter will require an average GDP growth of 4.7% for the third and fourth quarter, which is possible under the current fiscal (and under a low -range currency).”
However, Garcia Herero also warned that the economic pace from the first half of the year can add:
“It would be challenging to maintain speed from the first half, to target the consumption of service, especially without strong and more permanent excitement measures.”
Garcia Herrero concluded:
“In all, while the Chinese economy is more likely to meet the government’s development goal, there are significant uncertainty below the road. Despite the headwinds moving from business friction and to maintain impurity, the government has more pills for further excitement.
Hang Seng dismisses gravity at 2025 rally
Despite the economic uncertainty, Chinese and Hong Kong Equities have posted strong benefits in 2025:
- CSI 300: In August +4.02%, +7.74% ytd.
- Shanghai Composite: +4.33% in August, +11.23% ytd.
- Hang Seng Index: +25.51% YTD, mainland both equity markets and NASDAQ ( +11.97% YTD) better.
While business development will dominate the market spirit, Bhavna rests for the next stimulation measures of Beijing. A delay, combined with weak data, can derail the current rally.
Further road: excitement or stall?
The US-China trade updates and the incentive plans of Beijing will continue to affect the risk property in the coming weeks. However, upcoming economic indicators will also require consideration. The next week, July industrial profit data and August private sector PMI will provide further clues on whether Beijing Tariff may do the headwind season.
Next to next week’s data, the People’s Bank of China (PBOC) will determine the loan Prime rates on August 20. Economists hope that PBOC will be placed one year and five -year -old LPRs at 3% and 3.5% respectively.
Track our real -time update on China trade policy and equity market trends, and consult our economic calendar.
