In January 2025, both the Caixin China Manufacturing and Services PMI (Purchasing Managers’ Index) hit a new low for four months, dropping by 0.4 and 0.3 percentage points respectively compared to December 2024. The employment situation is extremely grim, with the manufacturing PMI employment index hitting its lowest level in nearly five years, while the composite PMI employment index reached a new low in 26 months.
S&P Global released the “Caixin China Manufacturing PMI” and “Caixin China Services PMI” as well as the “Caixin China Composite PMI” on Monday (February 3) and Wednesday (February 5).
The data shows that the services PMI recorded 51.0, down by 1.2 percentage points from the previous value of 52.2; the manufacturing PMI recorded 50.1, a decrease of 0.4 percentage points from the previous value of 50.5; and the composite PMI recorded 51.1, down by 0.3 percentage points from the previous value of 51.4. Although all three indices are still in the expansion zone, they have hit new lows since October 2024.
Of particular concern is the report from S&P Global stating that due to relaxed production capacity, the “employment index” in the composite PMI reached a new low in 26 months, with labor demand falling at the sharpest rate in two years.
The employment index in the manufacturing PMI has been in contraction for the fifth consecutive month, reaching a new low since March 2020, with the most significant job cuts seen in consumer goods companies.
The employment index in the services PMI has contracted for two consecutive months, hitting its lowest level since May 2024.
Wang Zhe, senior economist at Caixin Insight, stated that cost reduction remains a top priority for manufacturing companies, but faced with job vacancies, companies are not actively replenishing their workforce.
A PMI of 50 is considered the dividing line between expansion and contraction – a reading above 50 indicates expansion while below 50 signals contraction.
The composite Purchasing Managers Index is the weighted average of the manufacturing and service sector indices, with the weight reflecting the respective scale of these sectors in official GDP data.
The PMI is the weighted average of five individual indices: new orders (30%), production (25%), employment level (20%), supplier delivery times (15%), and inventory levels (10%).
Wang Zhe, senior economist at Caixin Insight, analyzed the January Caixin PMI, stating that in the new year, the effects of large-scale equipment upgrades and stimulus policies like trading in old products for new ones may be slowing down. With increased uncertainty in overseas policies, the export environment could deteriorate, posing a significant challenge to the Chinese economy. Insufficient domestic demand and the need to enhance consumer purchasing power are pressing issues.
China’s National Bureau of Statistics released data on December 2024 unemployment rates on January 20. The unemployment rate for labor force aged 16-24, excluding students, stood at 15.7%, continuing the trend of high youth unemployment throughout 2024.
According to a report by Zhaopin Recruitment, the employment rate for college graduates in 2024 was only 55.5%, meaning that nearly half of university graduates were unemployed.