Introduction to January 2025 PMI Data

The latest Purchasing Managers’ Index (PMI) figures for January 2025 reveal critical insights into the state of China’s economy. The data showcases a dip in manufacturing and non-manufacturing PMIs, signaling weakening demand and fragile economic recovery. This report dives into the specifics of each sector, highlighting the challenges and opportunities for large, medium, and small enterprises amidst fluctuating domestic and global conditions.

Manufacturing PMI: A Slippery Slope

China’s manufacturing PMI for January fell to 49.1, a 1.0-point month-on-month (mom) decrease, slipping below the 50-point threshold that separates expansion from contraction. This marked the first contraction since October 2024 and was significantly below Bloomberg’s expectations of 50.1.

• Manufacturing output took a sharp dive to 49.8 (-2.3pt mom), indicating a slowdown in production activity.
• New orders dropped to 49.2 (-1.8pt mom), further underscoring declining demand.
• New export orders experienced a substantial contraction, falling to 46.4 (-1.9pt mom), reflecting subdued overseas demand.
• Purchase prices rose to 49.5 (+1.3pt mom), suggesting increasing input costs that could erode profitability.
• Outdoor prices, however, showed slight improvement, climbing to 47.4 (+0.7pt mom).

The challenges were particularly pronounced for small-sized enterprises, whose PMI dropped to 46.5 (-2.0pt mom), while medium and large enterprises recorded moderate declines to 49.5 (-1.2pt mom) and 49.9 (-0.6pt mom), respectively.

Non-Manufacturing PMI: A Mixed Bag

China’s non-manufacturing PMI for January stood at 50.2, a 2.0-point decline from the previous month, barely remaining in expansionary territory.

• Construction activity contracted sharply, plunging to 49.3 (-3.9pt mom), reflecting a downturn in infrastructure and real estate projects.
• The services sector also saw a slowdown, with its PMI falling to 50.3 (-1.7pt mom).
• New orders in the non-manufacturing sector dropped to 46.4 (-2.3pt mom), remaining in contraction territory.
• New export orders for services recorded a significant decline to 44.6 (-5.4pt mom), indicating waning global demand.
• Employment levels showed slight improvement, climbing to 46.7 (+0.9pt mom), while business expectations moderated to 56.7 (-0.8pt mom).

Corporate Performance by Size: Small Enterprises Struggle

Corporate performance varied significantly by size in January:

• Large Enterprises: PMI dropped slightly to 49.9 (-0.6pt mom), nearing contractionary levels.
• Medium Enterprises: PMI fell to 49.5 (-1.2pt mom), reflecting declining activity.
• Small Enterprises: PMI experienced a sharp decline to 46.5 (-2.0pt mom), highlighting struggles with weak external demand.

Key Takeaways and Policy Implications

The January PMI data underscores the fragility of China’s economic recovery amidst softer external demand and a slowdown in domestic construction activity. The following insights emerge:

• Targeted policy measures are essential to stimulate domestic demand and diversify export markets to mitigate geographical risks.
• Improved employment figures offer a glimmer of hope, but declining business expectations suggest waning optimism among businesses.
• The sharp decline in small enterprises’ PMI highlights the need for support tailored to this vulnerable segment.

Investors are likely to focus on potential government interventions in the lead-up to the Two Sessions, where new supportive measures may be announced to bolster economic stability.