China's Manufacturing Activity Expands Amid Trade Risks

China's manufacturing activity expanded in February 2025, as indicated by the Purchasing Managers' Index (PMI) rising to 50.2, up 1.1 percentage points from the previous month. This expansion signals a rebound in production activities and market demand, driven by policy measures to stimulate economic growth. However, geopolitical conflicts and power games among major nations present substantial challenges to cross-border trade and global economic development.

The PMI data shows that the production index rose to 52.5, a jump of 2.7 percentage points from last month, while the new order index rose to 51.1, up 1.9 percentage points from January. The supplier delivery time index reached 51.0, up 0.7 percentage point from January, suggesting an acceleration in manufacturing material deliveries. The raw material inventory index stood at 47.0, and the employment index reached 48.6, up 0.5 percentage points from January, signaling a gradual improvement in employment sentiment.



The expansion in manufacturing activity comes amidst geopolitical risks and trade tensions. A recent study by the National Security Institute of Renmin University and the China Overseas Security Research Institute highlights the challenges China faces in safeguarding its overseas interests. The report suggests that overseas Chinese enterprises and institutions should be better prepared to deal with investment and tariff issues, negative impacts, and opportunities of US trade policies, and gain a comprehensive understanding of local relevant laws and regulations.

The report also notes that the accelerated restructuring of supply chains, emerging challenges of the digital era, and heightened political instability in many countries bring uncertainties to China's overseas security. By the end of 2022, China had established 47,000 overseas enterprises in 190 countries and regions, spanning industries such as business services, manufacturing, finance, and renewable energy. The number of Chinese students studying abroad reached 1.088 million, while nearly 260,000 labor personnel were dispatched by Chinese enterprises in 2022. In the first half of 2023, outbound tourism exceeded 40 million trips.

Despite the geopolitical risks and trade tensions, China's manufacturing activity continues to expand, driven by policy measures and a rebound in market demand. However, the long-term economic outlook for China, as projected by The Conference Board, highlights several structural imbalances and geopolitical headwinds that may constrain consumption and capital growth. These include a large state sector, regional development divide, consumers' need for precautionary savings, and geopolitical headwinds such as US-China strategic competition, reliance on imports of key technology components, uncertainty in global trade policies, and heightened political instability in many countries.

In conclusion, China's manufacturing activity expanded in February 2025, driven by policy measures and a rebound in market demand. However, geopolitical risks and trade tensions pose significant challenges to China's economic growth and its overseas interests. The long-term economic outlook for China highlights several structural imbalances and geopolitical headwinds that may constrain consumption and capital growth. Policymakers must address these challenges to ensure sustainable economic growth and maintain China's role as a key driver of global economic growth.