China’s factory activity contracted in April to its lowest level since December 2023, despite ongoing government stimulus efforts, according to official data released by the National Bureau of Statistics on Wednesday.
The manufacturing purchasing managers’ index (PMI) — a leading economic gauge of business conditions — fell to 49.0 for the month, well below the 49.8 forecast by analysts. A reading below 50.0 indicates contraction.
This marks the first monthly decline in China’s manufacturing sector in 2025. In March, the PMI stood at 50.5, the highest reading this year, driven by businesses accelerating orders and shipments in anticipation of reciprocal tariffs imposed by US President Donald Trump.
“We expect that April's trade will show the biggest decline in terms of China's exports to the US. This is because importers have been in wait-and-see mode, hoping trade talks might lead to lower tariffs,” analysts at ING Group wrote in a report.
Business conditions deteriorate across the board
The latest PMI data showed that several key components weakened sharply in April. Both output and new orders recorded significant declines compared with the previous month, with foreign orders tumbling to 44.7 — the lowest level in eleven months.
Employment contracted at a faster pace, while buying activity declined for the first time in three months. Furthermore, both input costs and selling prices fell at the fastest rate in seven months. Business confidence also dropped to a seven-month low.
By contrast, China’s non-manufacturing PMI appeared more resilient, registering 50.4 in April — a slight decline from 50.8 in March. Nonetheless, the data marked the 28th consecutive month of expansion in the services sector.
Signs of US-China trade de-escalation
President Trump implemented sweeping reciprocal tariffs of up to 145% on all Chinese goods in April. In retaliation, Beijing imposed 125% import levies on US goods and pledged to “fight to the end”. Chinese officials have repeatedly insisted that no trade negotiations are taking place, despite Trump’s claims that talks are ongoing.
However, there are emerging signs of a potential de-escalation in the trade war. Last week, Trump vowed to “substantially” reduce tariffs on Chinese goods. US Treasury Secretary Scott Bessent acknowledged that high tariffs on both sides were unsustainable, telling reporters that while “de-escalation is up to China”, the US will not reduce tariffs “unilaterally”.
The Wall Street Journal reported that the Trump administration was considering lowering tariffs on Chinese goods to a range between 50% and 65%. A tiered approach may be introduced, with tariffs of 35% applied to goods not deemed critical to national security, while tariffs of at least 100% would be retained on essential imports from China.
Nevertheless, Beijing has shown no signs of readiness to engage in tariff negotiations.
Last week, China’s Ministry of Commerce stated: “Any claims about progress in China-US trade talks are purely speculative and have no factual basis.”
It urged Washington to “completely remove all unilateral tariff measures against China, and seek to resolve differences through equal dialogue”.
