The manufacturing sector is recovering in China thanks to government stimulus packages

China’s manufacturing sector, one of the main pillars of the global economy, began to partially recover at the end of 2024, after a period of slowdown due to declining global demand and geopolitical tensions. This recovery was driven by huge government stimulus packages aimed at reviving the economy and mitigating the effects of global economic pressures, according to what the South China Morning Post reported on its website.

Signs of recovery in the manufacturing sector

According to the latest data from China’s National Bureau of Statistics, the manufacturing Purchasing Managers’ Index (PMI) rose to 51.2 points in November, crossing the 50-point mark that separates contraction from growth. This is the highest level in more than a year, reflecting a renewed expansion in industrial activity.

Industrial production data also showed a 4.3% year-on-year growth in October and November, with notable improvement in the high-technology and heavy machinery sectors, supported by government initiatives to boost export and domestic consumption.
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Stimulus packages from the Chinese government

Government stimulus packages launched since the middle of this year have played a pivotal role in supporting the manufacturing sector, including reducing taxes and providing broad tax exemptions to small and medium-sized companies to stimulate production and ease financial burdens. In addition to increasing public spending, and enhancing investment in smart infrastructure and renewable energy, which provided additional demand for industrial products. While supporting innovation, and providing subsidies to companies working in advanced technology fields to develop new products and improve their global competitiveness.

Challenges facing the manufacturing sector

Despite this partial recovery, the sector still faces several challenges, the most prominent of which are: the slowdown in external demand, as global demand remains weak due to high borrowing costs in Western markets. Supply chain fluctuations, as trade and geopolitical tensions continue to impact flows of raw materials and basic components. And debt pressures, as many manufacturers in China are having difficulty obtaining the necessary financing due to high levels of domestic debt.
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Future forecasts for the Chinese economy

With continued government incentives and China’s focus on promoting sustainable growth, the manufacturing sector is expected to continue to recover in 2025. Economists estimate that the sector will grow by 4-5% over the next year, supported by increasing domestic demand and expanding investments in innovation.

While China’s manufacturing sector has not yet reached its previous peak, the recent recovery shows signs of the success of government stimulus policies. Facing continuing challenges, China’s ability to balance economic stimulus with long-term sustainability will remain a critical factor in the future of this vital sector.