China’s manufacturing sector
China’s manufacturing sector saw a modest dip in activity this July, driven by seasonal patterns and weather-related disruptions. Beneath the surface however, the sector is undergoing a measured, strategic evolution. While the headline Purchasing Managers’ Index (PMI) slipped slightly to 49.3 just below the neutral threshold of 50 it would be a mistake to interpret this as a sign of structural weakness. July’s data, instead reinforces a growing narrative that China’s manufacturing ecosystem is becoming more resilient, technologically advanced, and structurally aligned with long-term development goals.
Reading Between the PMI Lines
The marginal fall in the PMI from 49.7 in June to 49.3 in July is reflective of the typical mid-year softening in industrial activity. High summer temperatures, regional flooding, and logistical slowdowns historically impact output during this period. Such temporary factors shouldn’t overshadow the more telling figures – high-tech manufacturing registered a PMI of 50.6, while equipment manufacturing came in at 50.3. These sub-indexes indicate expansion and suggest that key strategic industries are not only holding firm but they are leading the way forward.
In contrast to legacy-heavy sectors like low-end assembly and basic materials, China’s manufacturing growth is increasingly concentrated in advanced subsectors. Industrial robotics, new energy vehicles (NEVs), next-generation information technology, and precision instruments are showing signs of durable strength. These are not just areas of domestic growth, they represent Beijing’s ambitions to position Chinese manufacturing as a global standard-setter in industrial innovation.
Business Confidence and Economic Foundations Strengthening
July’s business expectation index rose to 52.6, reflecting mounting optimism among manufacturers. The auto, electrical, and rail equipment industries all reported expectation readings above 55, an indication of robust forward orders and continued investment confidence. This improvement in sentiment is further supported by the sustained expansion of China’s production index and the steady increase in manufacturing profits, which rose 1.4% year-on-year in June, reversing the 4.1% contraction seen in May.
What’s important here is not just the return to profitability, but the composition of it. Large enterprises, traditionally slower to pivot are showing encouraging signs of adaptability. Their stability provides a solid base, while agile small- and medium-sized enterprises (SMEs) continue to drive experimentation and sectoral diversification.
China’s first-half GDP growth of 5.3% year-on-year also supports the notion that manufacturing is feeding into broader economic momentum. The current trajectory points to a more balanced growth model, with manufacturing serving as a bridge between traditional infrastructure-led investment and domestic demand-driven development.
Policy Precision
The latest Political Bureau meeting of the Communist Party of China (CPC) laid out a forward-looking roadmap for the second half of 2025. Recognising both opportunities and risks, it outlined an agenda focused on accelerating government bond deployment, encouraging private investment, and cultivating high-growth, globally competitive pillar industries.
China’s macroeconomic management remains one of its most potent tools. The government has resisted resorting to blunt stimulus and instead employs targeted fiscal and monetary instruments, ensuring long-term stability without fuelling inflationary risk. Yang Zhiyong of the Chinese Academy of Fiscal Sciences reinforced this point, noting the breadth of China’s macroeconomic toolbox and the policy headroom that remains untapped.
Strategic Implications and the BRICS Undercurrent
Within the BRICS framework, China’s manufacturing strength becomes even more consequential. China is increasingly positioned to serve as the bloc’s industrial backbone. This doesn’t mean dominance; rather, it reflects an ecosystem where manufacturing interdependencies could be more formally structured.
There is growing space within BRICS+ to build collaborative frameworks for supply chain diversification, shared technological standards, and mutual investment in smart manufacturing clusters. China’s high-tech production momentum can become an anchor for such cooperation, especially in sectors like green energy, transport electrification, and semiconductors.
China’s July manufacturing data is a timely reminder that numbers alone don’t tell the full story. Yes, the headline PMI reading dipped below 50, but this masks a far more significant shift. The qualitative upgrading of China’s industrial landscape. As old engines of growth give way to innovation-driven sectors, and policy focuses on long-term competitiveness rather than short-term fixes, the Chinese manufacturing machine is not slowing, it’s recalibrating.
Written By:
Chloe Maluleke
Associate at BRICS+ Consulting Group
Russian & Middle Eastern Specialist