In December, the Manufacturing Purchasing Managers' Index (PMI) was 49%, a decrease of 0.4 percentage points from the previous month. What does this data indicate?

On December 31st, data from the National Bureau of Statistics showed that in December, the Purchasing Managers' Index (PMI) for the manufacturing sector was 49.0%, a decrease of 0.4 percentage points compared to the previous month, indicating a slight decline in the manufacturing sector’s business activity. Zhao Qinghe, a senior statistician at the National Bureau of Statistics Service Industry Survey Center, provided an interpretation of this data.In December, the PMI for the manufacturing sector was 49.0%, down 0.4 percentage points from the previous month. The business activity index for the non-manufacturing sector was 50.4%, an increase of 0.2 percentage points compared to the previous month. The comprehensive PMI output index was 50.3%, a slight decrease of 0.1 percentage points from the previous month, indicating overall stability in China’s economic output and business activity.Source: National Bureau of Statistics: December Manufacturing Purchasing Managers' Index (PMI) at 49% | Mijing Net

Economic Recovery in China: A Temporary Surge or a Sustained Trend?

Everything has been within expectations, anticipated.

This anticipation started on September 30th when the PMI exceeded 50, and I foresaw this happening. Why? Here are the reasons that were given at the time, which can be exactly repeated now.

The manufacturing PMI for September was 50.2, marking four consecutive months of recovery and the first rise into the expansion range since April. How should this be interpreted?

Various economic indicators are improving, which is very positive. But can this growth be sustained?

What caused the increase in industrial profits in August and the positive turn in September’s PMI?

Since June 2021, the new construction area in real estate has been continuously declining. By November 2022, this decline ceased, dropping from 270 million square meters to 80 million square meters, a significant reduction. Since November 2022, although it has been hovering at a low level, it has not continued to decline, maintaining around 80 million for ten months.

However, during these ten months, industrial finished product inventories have been continuously decreasing, with the growth rate dropping from 12.6% in November 2022 to 1.6% in July 2023. Thus, even though the demand for raw materials in real estate remains low, the decline in inventory is faster. This leads to a situation where: Demand is low, but supply is even lower. As a result, by the end of June, commodity prices began to rise. The increase in prices drove companies to enter a stock replenishing mode, significantly boosting demand, leading to increased industrial profits, PMI returning to the expansion zone, and a series of other outcomes.

In the purple frame, the new construction area in real estate continues to hover at a low level without declining further. But the inventory continues to decrease. Eventually, demand exceeds inventory.

Does this recovery have the potential for long-term sustainability?

No. The reason for this recovery is not due to an increase in demand leading to insufficient supply. It is merely a recovery caused by a lesser demand but even lesser supply. Since the demand itself is very low, the demand for restocking will also be low, leading to a quick end.

The real indicator reflecting enterprises' economic outlook is the PMI employment index. The level of this index reflects the willingness of enterprises to hire labor. Only when enterprises are genuinely willing to increase hiring can it represent a positive economic outlook from businesses.

In April 2020, right after the severe outbreak and lockdown of the pandemic in March, the economy suffered significant damage. However, the PMI employment index sharply rose to 50.3, reaching an 8-year high, indicating that Chinese enterprises did not believe the pandemic would have a lasting impact on the economy. They immediately increased their hiring efforts once the situation eased. However, although the PMI has turned positive this month, the employment index is still hovering at a very low level, indicating that enterprises do not believe in a real economic turnaround. If enterprises do not believe in an economic upturn, they will not increase investment or hiring, leading to unlikely prolonged increases in production and consumption.

A truly sustained recovery must be one where demand can continuously increase. For example, the real estate price increase and inventory reduction that began in 2016 led to five years of continuously climbing sales in the housing market. Without such a level of demand increase, the current recovery is nothing more than a fleeting phenomenon.

Assessing China’s Manufacturing Sector: Recent PMI and Economic Outlook

Once again, the PMI data was released over the weekend. Looking at it, December’s figures are still below the threshold line, indicating significant economic pressure.

The December PMI stands at 49, even lower than the previous month.

However, I’m waiting for the Caixin PMI to be released for a potentially more optimistic perspective.

As usual, it’s important to analyze the sub-indices:

  • The Production Index is at 50.2%, a 0.5 percentage point decrease from the previous month but still above the critical point, indicating continued expansion in manufacturing production.
  • The New Orders Index is at 48.7%, down 0.7 percentage points, suggesting a decline in market demand for manufacturing.
  • The Raw Material Inventory Index is at 47.7%, decreasing by 0.3 percentage points, indicating a reduction in the inventory of major raw materials in manufacturing.
  • The Employment Index is at 47.9%, a decrease of 0.2 percentage points, showing a slight drop in employment prospects within the manufacturing sector.
  • The Supplier Delivery Time Index is at 50.3%, unchanged from the previous month and above the critical point, indicating a continued acceleration in the delivery time of raw materials.

Out of these five sub-indices, four are lower than last month, reflecting subdued conditions in the manufacturing sector.

Recent economic data over the past few months have clearly shown that our previous optimism about China’s inventory reduction cycle was overly optimistic. The cycle didn’t end in the third quarter of 2023, as many analysts had predicted based on historical trends. It now seems that the actual completion of de-stocking in China might extend to mid-2024.

I have previously written an article analyzing this, asking when the next large-scale restocking in China might occur.

The reason for the misprediction is clear: the post-restriction recovery of China’s domestic demand has been significantly lower than expected. There was no revenge spending as many had anticipated. This fundamental miscalculation led to a cascade of predictive errors.

However, on the other hand, it’s not that the demand has disappeared entirely; it’s just weak. Many analysts tend to swing from one extreme to another, declaring a crisis at the slightest downturn. There’s no need for such pessimism; weak demand means slower de-stocking, but inventory levels will eventually normalize.

Due to the nature of corporate stockpiling, when restocking occurs, it often feels like corporate profits surge suddenly. After the second half of 2024, as restocking begins in China and the United States, the economy is expected to feel much better.

Digging into overlooked economic data and uncovering hidden financial truths. I am [Author’s Name], continuously updating on economic and financial matters. Stay tuned for more insights, and if you find my answers helpful, a gentle like is much appreciated.

December Manufacturing and Non-Manufacturing PMI in China

Providing more information for users:

National Bureau of Statistics: December Manufacturing PMI at 49%

Edited by Bi Lumming

On December 31st, data from the National Bureau of Statistics showed that the December Manufacturing Purchasing Managers' Index (PMI) was 49.0%, a decrease of 0.4 percentage points from the previous month, indicating a slight decline in the vitality of the manufacturing sector. Senior statistician Zhao Qinghe from the Service Industry Survey Center of the National Bureau of Statistics provided an interpretation.

In December, the Manufacturing PMI was 49.0%, down by 0.4 percentage points from the previous month; the non-manufacturing business activity index was 50.4%, up by 0.2 percentage points; and the comprehensive PMI output index was 50.3%, slightly falling by 0.1 percentage points from the previous month. These indicate that the overall output vitality level of China’s economy remained stable.

December Manufacturing PMI at 49%

1. Operation of China’s Manufacturing Purchasing Managers Index

In December, the Manufacturing PMI was 49.0%, down by 0.4 percentage points from the previous month, showing a slight decrease in the sector’s vitality.

Looking at company sizes, the PMI for large enterprises was 50.0%, a decrease of 0.5 percentage points and right on the threshold point; the PMIs for medium and small-sized enterprises were 48.7% and 47.3% respectively, both down from the previous month and below the threshold point.

Among the sub-indices constituting the Manufacturing PMI, the Production Index and Supplier Delivery Time Index were above the threshold, indicating ongoing expansion and faster delivery times respectively. However, the New Orders Index, Raw Materials Inventory Index, and Employment Index were below the threshold, pointing to decreased market demand, reduced raw material inventories, and a dip in employment conditions within the manufacturing sector.

2. Operation of China’s Non-Manufacturing Purchasing Managers Index

In December, the non-manufacturing business activity index was 50.4%, up by 0.2 percentage points from the previous month and above the threshold, indicating a slight acceleration in the expansion of the non-manufacturing sector.

Looking at different sectors, the business activity index for construction was 56.9%, up by 1.9 percentage points, and the service industry business activity index was 49.3%, remaining flat from the previous month. Specific sectors such as postal services, telecommunications, financial services, and insurance had business activity indices above 55.0%, indicating higher business vitality, while sectors like water transportation, capital market services, and real estate were below the threshold.

3. Operation of China’s Comprehensive PMI Output Index

In December, the comprehensive PMI output index was 50.3%, a slight decrease of 0.1 percentage points from the previous month but still above the threshold, indicating that overall production and operational activities in China maintained expansion. The manufacturing production index and non-manufacturing business activity index, constituting the comprehensive PMI output index, were 50.2% and 50.4%, respectively.

The interpretation from the National Bureau of Statistics reflects a nuanced picture of China’s manufacturing and non-manufacturing sectors, showing a mix of stability and slight decreases in different areas of economic activity.

Comprehensive news from the National Bureau of Statistics

Manufacturing Sector Challenges in China

In November, the PMI (Purchasing Managers' Index) was at 49.4%, which marked a decrease of 0.5. In December, it further declined to 49%, with a decrease of 0.4. Can we consider this a narrowing of the decline? However, the expected PMI was 49.8 (expected growth), which seems to be falling short of mainstream expectations.

Speaking of the manufacturing sector, our country, with only one-sixth of the world’s population, contributes to 29% of global manufacturing. This is already quite significant, considering the principle of global division of labor. Shouldn’t there be a reasonable allocation of tasks, such as contributing more to agriculture or energy supply or enjoying exemptions in technology? In reality, there is currently no such balance.

The manufacturing sector has become something that persists in order to support the existing economic model. Combined with yesterday’s revelation of a correction in GDP for 2022, with over 800 billion overreported in the secondary sector, it is essentially propping up an unreasonable scale of manufacturing. We are not suggesting that the economy should shift entirely to the virtual or that material production is undesirable. Instead, everything has an optimal quantity, and it is an undeniable fact that there is a significant excess in Chinese manufacturing. This has been acknowledged repeatedly over the past decade, with various official calls for “supply-side reform.”

The decline in the manufacturing sector is simply a correction of past mistakes, and the entire economic model is not solely dependent on manufacturing. Looking at the comprehensive PMI, it’s still relatively stable, although it has dropped slightly but remains above 50.

December’s CPI and PPI are also unlikely to perform well. With the PMI forecast rising to 49.8, the forecasts for CPI and PPI are -0.5 and -2.9, respectively. With the continued decline in PMI, it’s likely that December’s data will not look promising, and the possibility of a sustained deflationary trend is becoming more evident.

Highlights: The construction industry index continued to rise, reaching 56.9, indicating strong vitality.

Is the real estate sector making a comeback? Or are there any major projects in progress?

Manufacturing Purchasing Managers' Index (PMI) Decline: A Mixed Signal

First, let’s be clear that the decline in the Manufacturing Purchasing Managers' Index (PMI) during this period might be considered “good news.” First, we need to understand what this decline in the index signifies.

A drop in the Manufacturing PMI implies a reduction in the number of orders, which could lead to companies scaling down production or temporarily suspending production lines. The demand for raw materials and intermediate products may decrease, resulting in a decline in capacity utilization in related industries. These all seem like “bad news.” So, why do we call it “good news”?

It’s because, as a production-oriented nation, we currently have a clear oversupply of production capacity on the supply side, especially in the manufacturing sector. There’s almost no situation where Chinese manufacturing has the technology for mass production but lacks capacity.

However, the reduction in total demand is a fact. If the Manufacturing PMI were to rise at this juncture, it could indicate that something else is happening, namely, companies are engaged in a final “struggle.” This refers to the intense competition where companies are trying to outperform each other through extreme cost reduction, labor cost reduction, and high tolerance for losses. This fierce competition leads to the elimination and exit of a large number of companies, which is extremely detrimental to the national economy. Therefore, the absence of such an event is considered fortunate.

Simultaneously, while financial support is being provided to companies, the decline in the Manufacturing PMI indicates that many companies, especially those in manufacturing, are choosing to keep their money “in their pockets” rather than blindly expanding investments or engaging in cutthroat competition. This decision is somewhat reassuring.

I’ve always said that unemployment is far more harmful than salary reductions. Many manufacturing companies, in the midst of fierce overcapacity competition, are granting extended leave to employees and providing basic salaries or even the most basic social security benefits, which is considered a contribution to society.

Economic Recovery Not as Rapid as Expected

Let’s make one thing clear: even though we’re approaching 2024, the traditional time for the Chinese New Year celebration isn’t the Gregorian New Year, but rather the Lunar New Year. So, in the normal course of things, most working people are still on the job, with just a short holiday break.

However, this year is quite exceptional. Many migrant workers and white-collar employees who have been laid off have already returned to their hometowns.

Why? Because they don’t have jobs anymore.

If you visit labor markets across different regions now, don’t look for online job postings. Instead, check out the short-term labor markets in various places. Over the past two months, all industries have been struggling significantly.

The first grim point is the lack of job opportunities. In the past, in the early hours of the day, groups of bosses or labor contractors used to come and pick workers in the short-term labor market. If you were willing to work hard, you could at least find some work to do. But now, it’s different. There are fewer job opportunities, and even if there are openings, they are only available to strong and able-bodied individuals. Older workers and those with physical weaknesses have no chance.

The second grim point is the low wages. In the past, in the short-term labor market, you could either look at hourly wages or daily wages. Daily wages typically ranged from 300 to 400 RMB. Don’t be deceived by these rates; the work is labor-intensive, not office-based. But now, the situation is worse. Daily wages have dropped to 200, 180, or even 150 RMB, reaching rock bottom.

Supply and demand are out of balance once again. Whether you want to work or not, someone else will if you don’t. For many migrant workers, it poses a question: should they continue working? The issue here is that most short-term labor market workers come from outside the local area. Local residents in major cities have many employment options, and whether it’s becoming a security guard or a courier for a ride-hailing service, they tend to have higher performance-based income. However, for those in the short-term labor market, being outsiders comes with its own set of costs: food, lodging, transportation, and so on. Working at a reasonable wage is acceptable, as you eventually earn some money. But if the wage is very low, it might not make sense, especially when you calculate your expenses and realize that you won’t be saving much.

The consideration here isn’t just about losing money; it’s also about what you gain after working so hard for a long time and possibly damaging your health.

Given these factors, many workers in the short-term labor market have chosen to return to their hometowns. After all, home is in the village, where you can grow some food without spending much money. It’s basically a cost-free option compared to the hardships and meager earnings outside. This is even truer for those working in the construction industry.

You should know that in the past, construction workers in the real estate sector were a significant source of employment. However, with the recent changes in the real estate market, demand for these jobs has dwindled. Nowadays, construction workers either return home or are on the road trying to collect unpaid wages.

However, collecting unpaid wages isn’t easy either because this year has been tough for employers too. Many white-collar workers have also been affected. With so many layoffs and the year-end approaching, it’s unlikely that companies are actively recruiting. Even if someone is in urgent need of a job, the job market currently offers little demand. The only option is to wait until after the New Year.

The economic chain is interconnected, and if businesses don’t make money, workers can’t earn. When people don’t have money, they hesitate to invest and consume, making it even harder for businesses.

This year, businesses are cautious about expanding their workforce, focusing on survival instead. Many business owners are operating with debt, so poor data is expected.

Anyway, it’s nearly the end of 2023, and the tough times of this year are coming to an end. Let’s hope for a better year ahead.

Economic Snapshot: Manufacturing PMI Drops, Non-Manufacturing Activity Gains

In December, the Manufacturing Purchasing Managers' Index (PMI) stood at 49.0%, a 0.4 percentage point decrease from the previous month.

The Non-Manufacturing Business Activity Index was 50.4%, up 0.2 percentage points from the previous month.

The Composite PMI Output Index was 50.3%, experiencing a marginal 0.1 percentage point decline from the previous month.

The overall economy is still hovering near the bottom.

Globally, major economies, including Europe and the United States, have continued to witness a contraction in their manufacturing sectors. In December, the initial values for the Manufacturing PMI in the United States and the Eurozone were 48.2% and 44.2%, respectively.

The main challenges facing companies are the reduction in overseas orders and insufficient domestic demand.

In December, due to factors such as the off-season in some basic raw material industries, the overall economic outlook saw a slight decline.


  1. Production Index Remains in Expansion

    The Production Index was 50.2%, a 0.5 percentage point decrease from the previous month but still above the critical point. Manufacturing enterprises have maintained continuous production expansion for seven consecutive months. Industries such as wood processing and furniture, metal products, general equipment, and electrical machinery and equipment have production indices above 54.0%, indicating rapid growth. However, industries like textiles, petroleum, coal, and other fuel processing, and non-metallic mineral products had production indices below the critical point, indicating insufficient production capacity.

  2. New Orders Index Declines

    The New Orders Index was 48.7%, down by 0.7 percentage points from the previous month, indicating weak demand in the manufacturing sector. Some industries such as metal products, railway, shipbuilding, aerospace equipment, computer communication, and electronic equipment continued to have new orders indices above the critical point, signifying expanding market demand. On the other hand, industries like textiles, clothing, chemicals, and non-metallic mineral products had lower new orders indices, indicating ongoing insufficient market demand.

  3. Emerging Sectors Continue to Grow

    High-tech manufacturing and equipment manufacturing PMIs were 50.3% and 50.2%, respectively, higher than the overall manufacturing level, showing continued expansion. However, the Consumer Goods Industry PMI was 49.4%, with a slight decrease in economic activity. High-energy-consuming industries had a PMI of 47.4%, 1.6 percentage points lower than the overall manufacturing level, indicating lower economic activity.

  4. Stable Market Expectations

    The Business Activity Expectation Index was 55.9%, up by 0.1 percentage points from the previous month, remaining in the high prosperity range for six consecutive months. In terms of industries, due to the approach of New Year and the Spring Festival, the production and business activity expectation indices of consumer goods industries such as food processing and refined tea were all above 60.0%, in a high prosperity range.

In December, the Non-Manufacturing Business Activity Index was 50.4%, up by 0.2 percentage points from the previous month, indicating an accelerated expansion in non-manufacturing activities.

  1. Service Industry Activity Remains Stable

    The Service Industry Business Activity Index was 49.3%, maintaining the same level as the previous month. Certain service industries related to travel consumption showed relatively weak market activity due to recent factors like cold waves. These included water transport, aviation, accommodation, and residential services, with business activity indices below 46.0%. In contrast, industries such as postal services, telecommunications, broadcasting and satellite transmission services, monetary and financial services, insurance, and more had business activity indices above 55.0%, indicating sustained rapid growth in business volume.

  2. Faster Expansion in Construction Industry Activity

    The Construction Industry Business Activity Index was 56.9%, up by 1.9 percentage points from the previous month. Some companies accelerated construction progress before the Spring Festival holiday, leading to an improvement in the construction industry’s economic outlook.

In every industry, there is a sense that in the entire month of December, there are fewer orders. Industries such as heavy chemicals, mechanical manufacturing, and basic construction have many projects in a state of pause or semi-pause.

We are a small company, and in the first twenty days of December, we only had two orders.

There were many inquiries, but very few contract executions.

As a result, the overall outlook for 2024 doesn’t look promising.

Fortunately, we still have international projects that are set to start before and after the Spring Festival, so we can feel a bit more at ease.

If the economy can rebound in May or June next year, there is still hope for economic development. If it continues to stagnate, life will be really tough.

Economic Challenges Persist

In recent months, there has been some recovery in orders, but the situation remains less than ideal. Demand is insufficient, with the new order index at 48.7% (previously 49.4%), the new export order index at 45.8% (previously 46.3%), and the backlog order index at 44.5% (previously 44.4%).

The business index for waterborne transportation in the service sector PMI is also very low, and December’s imports and exports are expected to be similar to November.

Manufacturing PMI has been on a downward trend for four consecutive months and has been below the boom-bust line for three months, showing an unfavorable trend. If the CPI data continues to decline, deflation is inevitable, leading the economy into a difficult situation. In tough economic times, one must continuously deplete their savings, and it seems that waiting for a better opportunity is the best choice.

At the same time, the non-manufacturing sector is showing clear signs of recovery, indicating that most non-manufacturing enterprises are more optimistic about the recent market recovery. However, compared to prosperous times, there is still room for improvement.

The data suggests that the risk of economic contraction is increasing. In this economic situation, both internal and external circulation, as well as the unified domestic market, are particularly important. The main reason for this is that ordinary people don’t have much disposable income. Although domestic savings rates are extremely high, who owns that money, how much of it is held in banks by ordinary people, and who dares to take it out for spending are all significant concerns.


  1. You thought China’s economy was doing well while Europe’s economy was not, then a 0.4% decline is a bad sign.

  2. You thought China’s economy was not doing well while Europe’s economy was strong, then a 0.4% decline is a good thing.

  3. You thought the entire global economy was not performing well, then a 0.4% decline is considered normal.

On December 31st, the National Bureau of Statistics released data indicating that in December, the Purchasing Managers' Index (PMI) for the manufacturing sector was 49%, a decrease of 0.4 percentage points compared to the previous month. The level of manufacturing industry prosperity has declined slightly.

In December, the textile industry and certain raw materials and high-energy-consuming manufacturing sectors experienced weak market demand, with a decrease in the new order index.

Manufacturing Sector PMI and Global Market Outlook

This year, the global Purchasing Managers' Index (PMI) for the manufacturing industry is around 48%. The data in the United States is generally in line with the global trend.

Our PMI is at 49%, slightly higher than the global average.

Currently, there are no significant new technologies or products, and worldwide high inflation has led to weak consumer demand. Many businesses are operating in a stagnant market, and maintaining a PMI of 49% is considered quite outstanding.

If the conflicts in the Middle East escalate, our PMI could see some improvement.

China’s recent international diplomacy efforts have been quite active. If they manage to create an international trade environment that moves away from the US dollar, it could significantly benefit us. For now, the most cost-effective approach in the business world is to compete for orders from the United States, Japan, and South Korea.

My factory is currently mainly supported by the European new energy market. If we lose orders from Europe, we will consider exploring business opportunities in the Middle East. In the future, we plan to do more business along the Belt and Road Initiative. However, in recent years, several deals I made with Iran and Turkey did not have satisfactory payment settlements. So, when dealing with countries in the Middle East, we’ll need to adopt a payment approach similar to selling equipment, with at least a 70% advance payment before shipment, to avoid potential disputes and quality issues.

Analysis of Manufacturing Sector PMI and Market Conditions

In summary, the primary issue remains with domestic demand. To evaluate monthly PMI data effectively, three key factors are crucial:

  1. Whether it returns above the 50-point threshold.
  2. Changes in the new order index.
  3. Variations in the employment index.

On the production side, there are no significant concerns, as most industries are experiencing excess capacity. The real problem lies on the demand side. Therefore, the order index is of utmost importance, along with the employment index, which can highlight several issues.

Overall, when PMI falls below 50, it indicates a recession, and when it surpasses 50, it signifies expansion. The critical point is the 50-point threshold. These three factors are the most critical.

Based on official data, the PMI for December was 49.0%, a decrease of 0.4% compared to the previous month, indicating continued pressure on the manufacturing sector and its recession.

In September, there was a return to above 50, but in October, November, and December, the index remained below 50, reflecting a shift from expansion to recession.

In December, many raw material industries experienced a low season, and various pressures from the global economy, global demand, domestic demand, and small and medium-sized manufacturing enterprises all had an impact. Small and medium-sized enterprises felt the most pressure when viewed by company size:

  • Large enterprises had a PMI of 50.0%.
  • Medium-sized enterprises had a PMI of 48.7%.
  • Small enterprises had a PMI of 47.3%.

Large enterprises managed to stay at 50, but small and medium-sized enterprises fell below 50. Many business owners have found it harder to do business this year, especially for small and medium-sized enterprises.

Specific Breakdown of PMI Data

  • Production index: 50.2%, above the critical point, indicating no issues in production and output.
  • New order index: 48.7%, below the critical point, indicating a lack of demand.
  • Raw material inventory index: 47.7%, below the critical point, suggesting average inventory levels of raw materials.
  • Employment index: 47.9%, below the critical point, showing a lack of prosperity in manufacturing employment.
  • Supplier delivery time index: 50.3%, above the critical point, indicating no problems in raw material supplier delivery times.

In summary, the key issue remains with demand and orders. With increased orders, all aspects of the industry are likely to improve.

Non-Manufacturing Sector and Construction Activity

In December, the non-manufacturing business activity index was 50.4%, above 50 and showing some improvement.

The construction industry’s business activity index was 56.9%, indicating significant improvement.

The service industry’s business activity index was 49.3%, still below 50 and similar to the previous month.

Both the new order index and employment index in the non-manufacturing sector were below 50, indicating that demand and employment remained average without much improvement.

The business activity expectation index was 60.3%, reflecting increased expectations due to the upcoming Chinese New Year, a typical occurrence every year.

Comprehensive PMI Output Index for December

The comprehensive PMI output index for December was 50.3%, above 50, but manufacturing still faces more significant challenges. Overall, the problem of insufficient demand persists.

Global economic conditions and distribution issues have a considerable impact on demand, as the core of consumption lies in income. A strong global economy can boost demand, and effective income distribution can raise income levels and stimulate demand. The key to boosting domestic demand is ensuring that people have the means to spend; with increased income, consumption will naturally rise, ultimately resolving the issue of domestic demand.

New Year Couplets

Top Line: Support the manufacturing industry, it’s going downhill. Bottom Line: Restrain the service industry, it’s doing fine. Horizontal Scroll: Parents are biased.

In the previous four consecutive months, there was a continuous increase, but now we’ve experienced three consecutive declines, and there is still significant pressure on the manufacturing sector’s recovery.

In December, similar situations were observed in China, the United States, Japan, and Europe, with all of their manufacturing sectors continuing to contract.

China had an expected value of 49.4, but the actual value was 49.

The United States had an expected value of 49.5, but the actual value was 48.2.

Japan had an actual value of 47.7.

The Eurozone had an expected value of 44.6, but the actual value was 44.2.

Interestingly, Vietnam and South Korea’s manufacturing PMI indices have returned above the boom-bust line. As leading indicators of global exports, does this suggest a potential recovery in global demand?

Do not need to look at short-term indicators like this.

Next year, monetary policy and fiscal policy will both go all out, with massive funds supporting large-scale investment and construction projects.

In the future, both sides of production demand will be highly active, and the economy will return to a high-speed expansion range.

In the past two years, the economy has encountered some setbacks, partly due to masks and partly due to some erroneous economic theories. If we loosen up, increase leverage at the central level, strengthen fiscal policy comprehensively, and reduce excessive reliance on the private sector, the economy can easily strengthen across the board.

Inflationary pressures persist.

The description indicates that the economy is likely to continue on a path towards deflation in the future. It is highly probable that the CPI will be negative when it is announced next month, and if it remains negative for three consecutive months, will anyone still discuss inflation? The economic trend is already quite clear, with no V-shaped reversal in sight. Everyone should be cautious about their wallets, avoid buying houses at this time, and refrain from taking on debt. It’s advisable to be frugal and wait until deposit interest rates drop to near 0, which would be about 5 years from now, before considering that housing prices have reached their lowest point. Housing prices are expected to fall to levels seen before 2015.

Of course, the cost of this approach is that overall social consumption continues to shrink, and the unemployment rate keeps rising, exacerbating a vicious cycle of deflation.

Focusing on Resident Income: A Key to Economic Progress

I have always believed that directly boosting residents' income is the most effective approach. Other methods of transmission are difficult, slow, and subject to decay, often failing to achieve the desired results. Solving the thirst for increased income among residents is paramount. Without addressing this need, no amount of stimulus will suffice.

The policy transmission process is fraught with pitfalls that require time to navigate. Even when you manage to fill them, there is a need for recovery. However, time is a luxury no one can afford in the face of such a long path filled with challenges. The existing policies are struggling to address all these issues comprehensively, and a gradual approach is necessary.

While transformation and upgrades are necessary, they cannot be accomplished overnight. The economy cannot wait, and the pressure on the common people is unbearable. If the common people cannot endure it, nothing else matters, no matter how good it may seem. Without a solid foundation, everything is built on thin air.

We should not proceed slowly or address minor issues while the fundamental problems persist. Directing resources to where they are needed the most can solve the problem efficiently. A process with over 90% attenuation loses its meaning, and ultimately, ten times the effort results in only half the outcome.

Within the current economic indicators, there should be a direct indicator reflecting the level of difficulty faced by residents. It should intuitively represent the economic situation, rather than going through a convoluted process of examining macro indicators, which cannot accurately regulate the economy. If the common people are not doing well, no development can thrive.

Even with all the promising indicators, they are useless if the income of the common people doesn’t rise. We are no longer in an era where we lack material production and supply; on the contrary, we have an oversupply of material capacity. What good is more stimulation when we need income support to digest this excess?

Stimulating producers further to produce more products without a corresponding increase in demand is also futile. If the products can’t be sold, there’s no profitability, and businesses may have to shut down.

Supporting only one aspect is insufficient; we must focus on increasing people’s income for an effective economic cycle to form. Without income, there is no consumption to stimulate, and it’s difficult to initiate an internal cycle. People with income will consume without the need for external stimulation.

Don’t worry that income support will lead to laziness; few people choose to be lazy when they have aspirations and opportunities. However, the pressure of livelihood forces individuals to prioritize immediate needs over long-term dreams.

Maslow’s hierarchy of needs theory applies to almost everyone. When survival needs are met, new needs and desires emerge, leading to innovation and creativity. That’s when the real breakthroughs happen.

Our current life, characterized by stress and uncertainty, is not conducive to the development of products like ChatGPT. When people are struggling to put food on the table, they don’t have the bandwidth to explore such innovations. Companies are even less likely to invest in research when their primary focus is extracting more money from the public. But there are experts in the grassroots who, without financial worries, can collaborate and bring about unexpected innovations. These innovators can lead the way forward and provide the much-needed vitality.