China Manufacturing Tracker: 2024-25 (Updated)

The manufacturing industry is a cornerstone of China’s economy and a crucial sector underpinning the global economy. In 2023, the manufacturing sector’s added value accounted for 26.2 percent of China’s total GDP, underscoring its vital role in the nation’s economic structure. Despite a gradual shift towards a more service-oriented and high-tech economy, manufacturing remains a key driver of economic growth, providing substantial employment, innovation, and export revenue.

Globally, China’s manufacturing prowess is even more pronounced. In 2023, the country contributed around 30 percent of the global manufacturing added value, solidifying its position as the world’s manufacturing powerhouse. This immense contribution underscores the sector’s critical role in global supply chains, influencing everything from consumer electronics to heavy machinery.

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China’s manufacturing industry continues to attract significant foreign investment and the country remains a preferred destination for multinational companies due to its unique advantages. These include a vast and skilled labor force capable of producing a wide range of goods at competitive costs, comprehensive and efficient supply chains, and advanced infrastructure. Additionally, strong government support through policies, subsidies, and incentives further enhances China’s appeal as a manufacturing hub.

The importance of China’s manufacturing industry extends beyond its borders, playing a crucial role in the global economy. As a major supplier of goods worldwide, any shifts in China’s manufacturing sector have significant ripple effects across global markets, highlighting its integral role in international trade and economic stability.

In this 2024-25 Manufacturing Tracker, China Briefing provides the latest data and information on China’s manufacturing industry to help foreign investors and analysts stay up-to-date with the latest economic indicators, resources, and policies impacting this vast industry.

Key indicators of the China manufacturing industry

Jump to:

• Manufacturing GDP
• Manufacturing added value
• Manufacturing PMI
• Manufacturing export
• Fixed asset investment
• Foreign direct investment
• Labor costs

Manufacturing GDP

Although the share of manufacturing within the economy has steadily shrunk over the past few decades, it remains the single largest contributing sector to economic growth, consistently accounting for over a quarter of China’s total GDP.

In the first three quarters of 2024, manufacturing GDP reached RMB32.09 trillion (US$4.49 trillion), up 10.6 percent on the same period in 2023 and accounting for around 39.0 percent of total GDP.

Manufacturing added value

Per the National Bureau of Statistics (NBS)’s definition, the industrial value-added growth rate, or the industrial growth rate, is an indicator used to reflect the degree of change in the volume of industrial production over a certain period of time. Industrial value-added growth covers three broad sectors: mining, manufacturing, and the supply of utilities and resources. The manufacturing value-added growth rate is therefore an indicator of the production volume within the manufacturing sector alone.

This indicator can be used to judge the short-term trend of the industrial economy and the degree of economic prosperity and acts as an important reference and basis for formulating and adjusting economic policies and implementing macroeconomic regulation.

Except for August, China’s manufacturing value-added growth has remained above 5 percent in 2024.

Manufacturing PMI

The Manufacturing Purchasing Managers’ Index (PMI) is a valuable tool for investors to gauge the current state of China’s manufacturing industry. It is an indicator of the economic health of the manufacturing sector, based on surveys of purchasing managers across various industries.

According to the NBS, manufacturing PMI in China is calculated by weighting five classification indices, which in turn are weighted depending on their leading impact on the economy. These indices are:

• The new order index, weighted at 30 percent;
• The production index, weighted at 25 percent;
• The employee index, weighted at 20 percent;
• The supplier delivery time index, weighted at 15 percent; and
• The raw material inventory index, weighted at 10 percent.

A PMI of over 50 percent reflects an expansion in the industry compared with the previous month, whereas a PMI of below 50 percent reflects a contraction compared with the previous month (National Bureau of Statistics).

Manufacturing export

Manufacturing exports can help investors understand the current demand for China’s manufacturing goods. When exports are strong, it typically reflects robust global demand for Chinese-made goods. High export levels also suggest that China remains competitive in international markets, maintaining its position as a global manufacturing leader.

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Conversely, a decline in manufacturing exports might signal weakening demand, potential challenges in production, or increased competition from other countries. This can be a warning sign for investors about potential slowdowns in the sector.

Per the NBS, the export delivery value refers to the value of products exported by industrial enterprises themselves (including exports to Hong Kong, Macao, and Taiwan) or entrusted to foreign trade departments for export, as well as the value of products produced by foreign merchants based on samples, materials and parts supplied, assembly, and compensation trade.

The industrial export delivery value covers exports from the three major industrial subsectors: mining, manufacturing, and the supply of utilities and resources.

According to data from both the World Bank and China’s General Administration of Customs, manufacturing export accounts for over 90 percent of China’s total exports. In 2023, China exported RMB 23.51 trillion (approximately US$3.68 trillion) worth of manufacturing products, while total goods exported amounted to RMB 23.77 trillion (approximately US$3.71 trillion), with manufacturing products accounting for 98 percent of the total. In this context, manufacturing exports account for a larger percentage of the overall industry exports. This outcome is primarily due to the exclusion of agricultural exports from the total goods trade.

As there are currently no publicly available data on manufacturing export delivery value, below we use industrial export delivery value to reflect the manufacturing exports.

Fixed asset investment

Fixed asset investment (FAI) in manufacturing provides investors with valuable insights into the long-term confidence and growth prospects of China’s manufacturing industry. When businesses are increasing investments in machinery, infrastructure, and factory expansions, it indicates optimism about future demand and a belief in the industry’s growth potential.

However, a decline in FAI may signal caution or uncertainty within the sector, potentially reflecting concerns about future demand, profitability, or economic conditions. They may also reflect underlying challenges, such as market access difficulties or regulatory hurdles that make it harder for companies to operate or expand.

The NBS defines FAI as the total workload of constructing and purchasing fixed assets completed in a certain period, as well as the related expenses, expressed in monetary terms.

Foreign direct investment

Manufacturing continues to be a major magnet for foreign direct investment (FDI) in China, absorbing 28.28 percent of total FDI in the first eight months of 2024.

FDI can provide an important indicator of international confidence in China’s manufacturing sector. Increasing FDI suggests that foreign companies see it as a profitable and stable environment for long-term investments. Conversely, a decline in FDI may indicate waning confidence due to factors like rising costs, regulatory challenges, or geopolitical tensions, suggesting potential vulnerabilities in the sector.

It is important to note that FDI figures may be skewed by a few large investment projects in some reporting months or years. Large investments by a few multinationals can disproportionately influence the numbers, and FDI figures therefore do not always reflect the accessibility of the industry to foreign companies as a whole.

Costs and factors of production in the China manufacturing industry

Labor costs

Labor costs in China have risen substantially in recent decades, with average salaries more than doubling over the last decade.

Annual average salaries are considerably higher in the public sector than the private sector across the majority of industries, including manufacturing. In 2023, the urban annual average salary in the public manufacturing industry was RMB 103,932 (US$14,568) an increase of 6.6 percent from 2022, whereas in the private sector, it reached RMB 71,762 (US$10,059), up 6.5 percent from 2022.

Manufacturing salaries have grown at an annual average rate of 9.1 percent and 9.5 percent in the private and non-private sectors respectively since 2013. Public sector manufacturing salaries rose from RMB 46,431 (US$6,493) in 2013 to RMB 103,932 (US$14,568) in 2023, while private sector manufacturing salaries rose from RMB 32,035 (US$4,479) to RMB 71,762 (US$10,059).

China also continues to raise its minimum wages, which vary between different provinces and cities. As of August 15, 2024, Shanghai has the highest monthly minimum wage, at RMB 2,690 per month (US$370). Beijing has the highest hourly minimum wage at RMB 26.4 per hour (US$3.7).

The lowest minimum wages can be found in Jilin and Xinjiang, with RMB 1,540 (US$215.9) per month.

For more information on China’s average wages, see our article: China’s Average Wages – Trends and Implications for Businesses.

For up-to-date information on China’s minimum wages, see our article: A Guide to Minimum Wages in China.

Utility costs

China’s electricity grid is divided into six main regions: Northwestern China, Northern China, Central China, Northeastern China, Eastern China, and Southern China. The State Grid Corporation of China (SGCC) supplies electricity to all of the regions except Southern China, which is serviced by China Southern Power Grid (CSG) (covering the provinces of Guangdong, Guangxi, Yunnan, Guizhou, and Hainan). SGCC and CSG are both state-owned companies and are tasked with periodically setting electricity prices for each region based on a set of national standards.

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China’s regional electricity pricing is governed by the Pricing Method for Regional Power Grid Transmission Prices, a document formulated by the National Development and Reform Commission (NDRC).

Electricity prices are adjusted at regular intervals depending on varying factors such as costs of fuel, demand, and government policies.

China’s water utility industry is much more scattered, with numerous utility companies providing services across different stages of the supply chain and in different regions. Among the largest companies are Beijing Enterprises Water Group (BEWG), Middle Environmental Protection Water Affair Investment Limited Company, China Water Affairs, Beijing Capital Eco-Environment Protection Group, and SUEZ Group.

Under China’s Water Law, water supply prices are determined in accordance with specific measures formulated by provincial-level governments (or above) in conjunction with the water administration authorities or other water supply administration authorities. This means water prices will vary considerably from region to region. Regional water pricing must nonetheless adhere to the Measures for the Administration of Urban Water Supply Prices, for urban areas.

For more information on China’s power rates, see our article: China’s Industrial Power Rates: A Guide for Investors.

China manufacturing industry clusters

China is home to over 2,000 industry clusters, areas where businesses and industries are consolidated to foster collaboration and competition. These clusters typically focus on specialized sectors, such as electronics, textiles, automotive manufacturing, or aviation, among many others. The proximity of these businesses allows for efficient supply chain integration, reducing costs and improving responsiveness.

The majority are located in economic hubs in the eastern and central provinces, with the distribution of different industrial sectors across the country often linked to each region’s natural resources, traditional industries, labor force, and production costs. However, with the emergence of new technology and advanced manufacturing industries and concerted efforts from the central and local governments, western and northern provinces have begun to cultivate new industry clusters focused on modern sectors.

For more information on China’s industry clusters, including breakdowns of different industries, see our article China’s Industry Clusters – A Comprehensive Overview.

Preferential policies and tax incentives for the manufacturing industry

China provides a range of preferential policies for companies in the manufacturing industry, including tax incentives to help lower value-added tax (VAT), corporate income tax (CIT), and tax deductions for research and development (R&D). The preferential policies are extensive and many apply to multiple different industries, not exclusively manufacturing. The table below contains a non-exhaustive list of the incentive policies currently available for companies in the manufacturing sector.

China’s tax authority reminds taxpayers that they can apply for the super deduction of R&D expenses for the first three quarters of 2024 during the October filing period. When prepaying CIT for the third quarter in October (for quarterly prepayments) or in September (for monthly prepayments), companies have the option to apply the super deduction policy for R&D expenses incurred in the first three quarters of the year. This decision should be based on their profit and loss situation, R&D expense accounting, and the total amount of R&D expenses.

For more information, see our article: China Tax Filing: Apply for Super Deductions of R&D Expenses for Q1-3 2024 in October

In addition to the tax incentives, China currently also provides the following fee reduction policies for companies in the manufacturing industry:

For more information on tax incentives and preferential policies for companies in the manufacturing industry, see our articles: China’s Tax Incentives for the Manufacturing Sector in 2023 and Tax Incentives for Manufacturing Companies in China in 2024.
(This tracker was first published on August 22, 2024, and was last updated on October 23, 2024.)

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