Thought of the Day

Prospects for the Chinese Economy Brighten

June data shows strong growth in the Services Sector


 
23 June 2025
 
Despite the Trump tariff threats and deeds, Business Confidence in both the Chinese Manufacturing and Services sectors stayed very positive in June. The overall China Business Confidence Index reading was 53.7, not so far from a 10-year high. This is in stark comparison with plunging Confidence levels registered in June in the USA (a recession inducing reading of 46.2). Confidence was high in both the China Manufacturing and Services sectors, but particularly in the latter, now at a 39-month high.

Chinese and US All-Sector Business Confidence Indexes
Diffusion Index: 50 = ‘no growth’
Prospects for the Chinese Economy Brighten
Prospects for the Chinese Economy Brighten


The Business Confidence Index is particularly important as the question asked of panel members relates to their confidence in the future course of business activity, not its present level. Sales Managers, because of the very nature of their work tend to be more attuned to the future. They are in general very aware of levels of contracts they expect to be signed shortly, as well as current order books, with the potential personal impact of likely sales levels on bonuses linked to sales. Economists often refer to levels of Business Confidence as "animal spirits", reflecting the great importance of Confidence on future levels of investment and employment.

The overall message regarding China must remain one of caution, as Manufacturing data remains subdued. Both the overall Manufacturing Index and the Market Growth and Jobs Indexes remain underwater (Index readings of less than 50, the level distinguishing economic growth from recession).

The big question remains : can the world's great growth engine of the past three decades move back towards its previously central role in sponsoring global economic expansion. Or will tariff wars with the USA keep China's growth and its influence on the world economy more restricted than has been the case for many years.
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