The manufacturing Purchasing Managers' Index (PMI), which indicates the economic trends in China, has shown the largest decline in 16 months. There are analyses suggesting that the aftermath of the U.S.-China tariff war is now taking effect. Attention is focused on whether China, which has shown little progress in tariff negotiations with the U.S., will introduce additional economic stimulus measures.

China's National Bureau of Statistics reported on the 30th that the manufacturing PMI for April was recorded at 49.0. This is a decrease of 1.5 points from the previous month (50.5), marking the lowest level since December 2023. It also fell short of the market forecast (49.8) compiled by Reuters. The PMI is a leading economic indicator calculated through a survey of purchasing managers in corporations, with a value above 50 indicating economic expansion and below 50 indicating economic contraction.

The trend of China's manufacturing Purchasing Managers' Index (PMI)./Courtesy of China's National Bureau of Statistics

The monthly manufacturing PMI in China fell to 49.1 in August last year but gradually recovered, rising to 50.3 in November. However, it began to decline after the election of Donald Trump as President of the United States, falling to 49.1 in January this year. It rebounded to 50.2 in February but this trend lasted only two months.

The significant contraction in manufacturing activity in April is attributed to the U.S.-China trade war as a decisive factor. Although Trump imposed additional tariffs on imported Chinese goods beginning in February this year, they were at a level of 20% until March. However, in April, the conflict between the two countries intensified, resulting in tariffs implemented during Trump's second administration reaching 145%.

Robin Sing, Chief Economist for China at Morgan Stanley, noted to Bloomberg that "it is certainly more serious than expected" and said, "this shows that tariffs have begun to have an effect." He added that significant economic slowdown is anticipated this quarter and that the need for additional economic stimulus measures has increased.

As U.S.-China tariff negotiations stall, major financial institutions are lowering their economic growth forecasts for China this year to around 4% or lower. China's target for economic growth this year is around 5%. Huang Jichun, an economist at Capital Economics, said, "While the Chinese government is strengthening fiscal support, it seems difficult to completely offset the economic downturn," and predicted that this year's economic growth rate would only reach 3.5%.