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China Manufacturing Signals Mixed Signals as Large Firms Outperform Mid-Size Competitors

China's manufacturing sector posted a purchasing managers' index of 50.3 in May, marking a marginal expansion but masking divergent performance across company sizes. Large enterprises recorded a PMI of 51.9, staying firmly in expansion territory, while medium and small-sized firms fell to 48.6, indicating contraction. The mixed results come despite China's 6.1% export growth in 2025, a period when the PMI declined in 11 of 12 months. Raw material costs have surged following geopolitical tensions, with the Purchase Price Index climbing from 54.8 to 63 since February. Production activity remained above the expansion threshold. However, new orders, raw materials inventory, employment and supplier delivery times all contracted, signaling cooling demand and extended supply chain delays across the manufacturing base.