China's manufacturing sector ended the year on a tempered note, with fresh data showing a lower-than-expected reading for December's purchasing managers index. According to the National Bureau of Statistics, the PMI stood at 50.1 in December, a figure just above the expansion threshold but below the 50.3 forecast by economists. This modest performance still marks the third consecutive month of expansion for the sector, buoyed in part by newly announced stimulus measures. The bureau remarked that "most major indexes that constitute the manufacturing PMI were above the critical point," an indication that production at many factories continued to improve.
Beyond manufacturing, China's non-manufacturing PMI saw a notable climb to 52.2 in December, an improvement from the prior month's 50.0. Observers view this uptick in services and construction activity as an added sign that the country's overall economic momentum might be on the mend. Analysts said these data points could help to justify ongoing policy moves from Beijing, which include expanded fiscal spending and relaxed monetary tools. Policymakers have signaled their intention to maintain a growth target of around 5.0% next year, aligning with the stated goal of ensuring stable employment and consumer spending.
Despite the improvements, uncertainty lies ahead for China's export-oriented manufacturing base. U.S. President-elect Donald Trump has pledged more aggressive trade measures once he takes office on January 20, including tariffs that he argued would pressure Beijing to address certain disputes. Trade specialists warn that any levies exceeding 10% could significantly disrupt China's exports to the United States-an outcome that might dampen industrial recovery efforts. Officials in Beijing have indicated they are prepared to "roll out more targeted, fiscal stimulus" in response to any adverse trade environment.
Several domestic factors are also shaping China's growth path. The country's property sector has remained a particular area of concern, as decelerating home sales and cautious construction activity weigh on broader investment levels. Some economists argue that local governments will require a careful balance of credit support and administrative measures to keep real estate from dragging down the wider economy. At the same time, consumption in areas like e-commerce and tourism has shown signs of resilience, suggesting that not all growth engines have stalled.
Outside China, many investors are watching U.S. monetary policy decisions that may impact global liquidity. But the immediate focus is on how Beijing navigates the threat of new tariffs. Should the Trump administration's policies materialize in early 2025, exporters could face headwinds that offset the benefits of increased stimulus at home. The net effect may be a more modest trajectory for China's industrial output than was anticipated just a few months ago.
Market participants, however, appear to find some comfort in data that show a continuing, albeit lukewarm, upswing in manufacturing. China's official narrative emphasizes that "the production activities of manufacturing enterprises maintained a rapid expansion," even if external demand remains fragile. The government's plan for more proactive fiscal steps underscores a willingness to deploy capital into infrastructure projects and key industries, particularly green technologies, to sustain momentum.
Meanwhile, the world's second-largest economy must also keep an eye on the global stage, where a combination of slowdowns in developed markets and rising geopolitical risks could constrain trade. Some economists believe that an aggressive U.S. tariff regime might not only complicate China's export sector but also incentivize companies to adjust supply chains away from heavy dependence on Chinese manufacturing.
