China’s Economy Sliding Downward: Manufacturing Industry in Crisis
China’s economy is on a downward spiral, with various industries facing a severe downturn. Even the traditional manufacturing sector is plunging into a harsh winter. The industry is filled with lamentations over strict controls, and even official data shows a crisis in manufacturing. However, authorities continue to emphasize the tune of “bright economic prospects.”
On January 27th, a blogger engaged in the business of second-hand circuit boards posted a video questioning, “Why have our orders all gone to foreign countries? Can we return to being the world’s factory as before? More and more factories in China are closing down, and masses of workers are job hunting. Is China’s manufacturing industry really on the verge of collapse?”
On January 26th, another blogger revealed in a video that a custom factory in Yangzhou Jiangdu had gone bankrupt, with all its assets, including 27 acres of industrial land and 7341 square meters of assets, being disposed of.
A migrant worker in mainland China working in metal stamping posted on January 20th, “This factory has really closed down. It hasn’t paid salaries for months, and it’s almost the end of the year but they still haven’t settled the wages. Everyone else has gone home to be with their parents, but here I am still waiting for my salary.”
At the beginning of 2025, official Chinese Communist Party (CCP) data showed a contraction in the Manufacturing Purchasing Managers’ Index (PMI) in January.
On January 27th, the National Bureau of Statistics of China announced a PMI of 49.1 for manufacturing in January, not only below market expectations but also ending three consecutive months of expansion, falling into contraction territory for the first time since August of the previous year.
PMI uses 50 as the dividing line – a reading above 50 signifies expansion, while below 50 indicates contraction.
Prior to this, in December 2024, the Caixin China Manufacturing Purchasing Managers’ Index recorded 50.5, down by 1.0 percentage points from November and below Reuters’ expectations of 51.7. Caixin reported that sample companies reflected a gloomy external economic environment, with unfavorable trade prospects and declining overseas demand for Chinese manufactured products.
China’s industrial profits have also decreased for four consecutive months. In August 2024, profits fell by 17.8% year on year, followed by declines of 27.1% in September, 10% in October, and 7.3% in November.
Many experts point out that CCP officials tend to exaggerate economic data.
As China’s economy continues to deteriorate, CCP’s stimulus policies have failed, and the economic downturn has spread from downstream manufacturing to upstream manufacturing. In 2024, China’s demand for refined oil peaked, leading to severe overcapacity in petrochemical enterprises, causing a significant drop in revenue and profits for the “Three Oil Giants.” Import volumes, processing volumes, refined oil sales, and prices have all begun a comprehensive downturn.
Data released by the National Bureau of Statistics of China shows that in 2024, China imported 553.42 million tons of crude oil, a 1.9% decrease from the previous year, and processed 708.43 million tons of crude oil by large-scale enterprises, a 1.6% decrease from the previous year. Both figures recorded their first decline in over twenty years, excluding 2022 which was impacted by the pandemic.
Longzhong Information (formerly known as the China Petrochemical Business Network established in 1988) pointed out in October 2024 that due to high international oil prices and weak domestic demand for refined oil, refining profits plummeted significantly. In the first half of 2024, profits of state-owned primary refineries and local refineries in Shandong Province decreased by 22.94% and 70.62%, respectively.
On September 14, 2024, Hua Star Petrochemical Group and Zhenghe Group, two local refineries in Shandong, were declared bankrupt by the court.
In addition, the solar industry in China faced escalating internal competition, overcapacity, and increased issues. Currently, at least 26 companies have disclosed their 2024 performance forecasts, with over 70% indicating expected net losses, including industry giants like Longi Green Energy. Several well-established solar companies reported their first losses after going public.
Steel prices plummeted in 2024, leading to increasing losses, and Chinese steel companies frequently found themselves in dire straits. Recently, 32 steel plants announced production halts for maintenance, with some factories closing furnaces due to bankruptcy. Billion-dollar steel enterprise Jiangsu Delong Nickel Industry is also heading towards bankruptcy.
On January 20, 2025, a blogger named “Beard Brothers Engineering Circle” posted a video showing a conversation at a gathering of industry professionals, where a factory owner expressed that many small and medium-sized enterprises in Guangdong had collapsed, with numerous companies already on vacation.
The factory owner stated, “The trend is clear – now is not the time to work too hard. The harder you work, the more miserable the outcome. It’s better to lie low and have reliable resources to make a breakthrough. Otherwise, we can only lie low domestically. If this issue is not resolved properly, the situation will worsen in the future, with consequences beyond your imagination.”
Xu Ruikun, a mainland paper towel manufacturer and founder, declared in a video, “During this period, many manufacturing business owners around me have closed down or fled. A major reason is that they themselves were owed money, which eventually led to the breakdown of the financial chain. Unable to continue, they chose to run away, forming an unsolvable vicious cycle.”
Blogger “Da Liu Talks Factories” believed that after the Chinese New Year, more factories are bound to close. He mentioned that despite considering shifting production overseas as a solution, it is not an easy task. In 2024, many touted the term “going global,” claiming that foreign trade or going abroad was a way out. However, after visiting Southeast Asia, they realized it was not as promising as expected. In reality, the United States and Europe are well aware that most manufacturing industries in Vietnam and Southeast Asia are supported by Chinese nationals, making the process of “going global” not as straightforward.
The blogger further mentioned that with the current poor domestic economy, everyone is struggling to make money, facing difficulties in hiring workers, increasing taxes, and social security costs. Many are laboring hard to sustain themselves. After January this year, there may indeed be more factory closures.
Despite the continuous decline of the Chinese economy, authorities continue to emphasize the tune of “bright economic prospects.”
Since 2023, CCP leader Xi Jinping and the political bureau Standing Committee member in charge of propaganda, Cai Qi, have consistently stressed the narrative of “bright economic prospects.” Recently, Cai Qi emphasized the need to strengthen public opinion control during the national propaganda ministerial meeting, specifically mentioning “strengthening economic propaganda and expectation guidance.”
The National Bureau of Statistics of China announced on January 17th that China’s GDP growth in 2024 was 5%, aligning with the official target, but significantly contrasting with the bleak economic conditions felt by the population over the past year, leading to public accusations of official misinformation.
Gao Shanwen, Director of the National Industry Research Institute and Chief Economist of National Investment Securities, stated in a speech at the end of last year, “We cannot know the true figures of China’s (economic) growth. Personally, I speculate that the actual average GDP growth rate over the past two to three years may be around 2%, despite the official figures being close to 5%.” Gao Shanwen was subsequently censored, becoming one of the many economists silenced in recent years.