December 2025 Caixin Manufacturing PMI: Signs of Cooling Amid Persistent Challenges
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The December 2025 Caixin Manufacturing PMI for China registered 49.90, down from 50.60 in November and below the 50.50 consensus forecast, signaling a contraction in factory activity for the first time since June 2025. This decline interrupts a modest recovery trend observed earlier in the year, where PMI readings fluctuated above 50, peaking at 51.20 in April and September. The sub-50 reading reflects a cooling manufacturing sector amid persistent headwinds including weaker global demand, supply chain disruptions, and cautious domestic investment.
Drivers this month
- Export orders declined, reflecting softer global demand amid geopolitical tensions.
- Input prices eased slightly but remained elevated, squeezing margins.
- New orders and production contracted, signaling reduced factory utilization.
- Employment levels held steady, indicating firms’ reluctance to cut staff amid uncertainty.
Policy pulse
The PMI reading sits just below the neutral 50 mark, underscoring the need for continued monetary accommodation. The People’s Bank of China (PBOC) has maintained a steady policy stance with targeted liquidity injections but has yet to deliver broad rate cuts amid inflation concerns. Fiscal policy remains supportive, with local government bond issuance accelerating to fund infrastructure projects, though the impact on manufacturing demand is lagging.
Market lens
Immediate reaction: The Chinese yuan (CNYUSD) weakened by 0.30% within the first hour post-release, while 2-year government bond yields remained stable near 2.80%. Equity markets showed mild risk-off sentiment, with the Shanghai Composite Index edging down 0.40%. The muted bond market response suggests expectations for continued policy support.
The Caixin Manufacturing PMI is a key barometer of China’s private-sector manufacturing health, complementing the official NBS PMI. The 49.90 reading contrasts with the official PMI’s 50.10 for November, highlighting divergent signals between private and state-owned enterprises. The decline aligns with other macro indicators showing a slowdown in industrial output growth, which expanded by 3.50% YoY in October, down from 4.20% in September.
Monetary policy & financial conditions
The PBOC’s prudent monetary stance aims to balance growth support with financial stability. Liquidity injections via medium-term lending facilities (MLF) totaled CNY 1.20 trillion in November, up 8% MoM, yet broad credit growth slowed to 10.50% YoY. Inflation remains contained at 1.80% YoY, allowing room for policy easing if needed.
Fiscal policy & government budget
Fiscal stimulus continues through accelerated local government special bond issuance, reaching CNY 3.50 trillion YTD, supporting infrastructure and manufacturing demand. However, fiscal deficits remain constrained by debt limits, limiting scope for large-scale stimulus. The government’s focus on “common prosperity” and green manufacturing adds structural complexity.
External shocks & geopolitical risks
Trade tensions and geopolitical uncertainties continue to weigh on export orders. The US-China trade relationship remains fragile, with tariffs and technology restrictions impacting supply chains. Additionally, slower global growth, especially in Europe and emerging markets, dampens external demand for Chinese manufactured goods.
Market lens
Immediate reaction: The yuan depreciated modestly against the US dollar, reflecting concerns over growth momentum. The 2-year Chinese government bond yield held steady, indicating market expectations for continued accommodative policy. Equity markets showed slight risk aversion, with the Hang Seng Index down 0.50% in early trading.
This chart highlights a clear reversal in manufacturing momentum after a five-month expansion phase. The contraction signals rising downside risks to industrial growth, with potential spillovers to employment and investment. The data suggest that without renewed policy stimulus or a rebound in global demand, the manufacturing sector may face prolonged softness.
Looking ahead, the Caixin Manufacturing PMI’s dip below 50 raises concerns about the near-term growth trajectory. Three scenarios emerge:
- Bullish (30% probability): Global demand stabilizes, and targeted monetary easing boosts domestic investment, lifting PMI above 51 by Q2 2026.
- Base (50% probability): Moderate recovery with PMI hovering near 50, supported by fiscal stimulus but constrained by external uncertainties.
- Bearish (20% probability): Prolonged global slowdown and geopolitical tensions deepen contraction, pushing PMI below 48 and triggering broader industrial weakness.
Structural & long-run trends
China’s manufacturing sector faces structural shifts including automation, green transition, and supply chain diversification. These trends may dampen traditional manufacturing output but improve productivity and sustainability. The government’s “dual circulation” strategy emphasizes domestic consumption and innovation, which could reshape manufacturing dynamics over the medium term.
The December Caixin Manufacturing PMI reading of 49.90 signals a cautious pause in China’s manufacturing recovery. While the sector faces near-term headwinds from weaker external demand and geopolitical risks, ongoing monetary and fiscal support provide a buffer. Investors and policymakers should monitor upcoming data for signs of stabilization or further deterioration. The balance of risks remains tilted to the downside, but structural reforms and policy flexibility offer pathways to renewed growth.
Key Markets Likely to React to Caixin Manufacturing PMI
The Caixin Manufacturing PMI is closely watched by global investors as a leading indicator of China’s industrial health and export momentum. Markets sensitive to Chinese growth dynamics typically include equities, currency pairs, and commodities linked to manufacturing demand. Here are five tradable symbols historically correlated with PMI fluctuations:
- 000001.SZ – Shenzhen Composite Index, reflecting domestic equity sentiment tied to manufacturing activity.
- CNYUSD – Chinese yuan vs. US dollar, sensitive to growth and policy shifts.
- 600519.SS – Kweichow Moutai, a bellwether consumer stock impacted by broader economic conditions.
- BTCUSD – Bitcoin, often reacting to risk sentiment shifts linked to China’s economic outlook.
- USDCNH – Offshore yuan, reflecting international capital flows and trade expectations.
FAQs
- What does the December 2025 Caixin Manufacturing PMI indicate about China’s economy?
- The PMI below 50 signals a contraction in manufacturing activity, suggesting cooling industrial growth and potential headwinds for the broader economy.
- How does the Caixin Manufacturing PMI affect financial markets?
- It influences currency valuations, equity sentiment, and bond yields as investors gauge China’s growth momentum and policy outlook.
- What are the key risks facing China’s manufacturing sector?
- Risks include weaker global demand, geopolitical tensions, supply chain disruptions, and structural shifts toward automation and green manufacturing.
Final takeaway: The December Caixin Manufacturing PMI’s dip below 50 highlights emerging challenges for China’s industrial sector, emphasizing the need for vigilant policy support and close monitoring of global demand trends.









The December Caixin Manufacturing PMI of 49.90 marks a 0.70-point decline from November’s 50.60 and sits below the 12-month average of 50.30. This signals a shift from expansion to contraction territory, reversing the modest gains seen since mid-2025. The trend reflects weakening new orders and production indices, which fell to 48.70 and 49.20 respectively, compared to 50.10 and 50.50 last month.
Input prices eased to 52.30 from 53.10 in November, indicating some relief in raw material costs, but output prices dropped to 48.90, suggesting manufacturers are under pricing pressure. Employment remained stable at 50.00, showing no immediate layoffs but cautious hiring.