**Rising Demand in the Manufacturing Sector** Input costs have risen at their quickest rate since November 2024. However, selling prices have stayed steady due to competition. Business confidence is at its highest since March, even with concerns about tariffs, export trends, and the property market. Previously called the Caixin PMI, now backed by ‘Rating Dog’, the report shows a China Manufacturing PMI of 49.4, just below the expected 49.5. The Services PMI stands at 50.3, which meets expectations. **Divergence in Economic Data** The unexpected growth in the S&P Global PMI, which focuses on smaller private firms, sharply contrasts with the official data from large state-owned companies. This difference indicates a two-speed recovery, creating chances for traders who can differentiate between sectors. Therefore, we need to be careful with broad positive bets on the overall Chinese economy. The report highlights rising input costs that have increased the fastest since November 2024. This is a strong indicator for the commodities market. With work backlogs also increasing, we can expect greater demand for industrial metals. For example, iron ore futures, which struggled in mid-2025, might see renewed buying interest, making call options on mining companies and commodity ETFs appealing for short-term investments. In the stock market, positive data may lead to a rally in indices like the FXI, which has traded in a narrow range for several months. However, the ongoing decline in employment and the property market, where new home prices dropped another 0.7% in July 2025 according to the National Bureau of Statistics, limits growth potential. This mixed signal suggests that volatility is a better strategy, making long straddles on key ETFs a smart way to profit from significant price swings in either direction. The rising input costs, combined with flat selling prices, indicate challenges for some manufacturers. We should consider buying put options on industrial companies that have low pricing power and high energy costs. This allows us to benefit from an expected dip in their next earnings reports. This recovery seems fragile, depending on the temporary delay of tariffs. We’ve seen this before, especially during the trade negotiations of 2024, where a surge in exports provided a brief boost that soon vanished. Any negative changes in trade policy could wipe out this month’s gains, so it’s wise to protect long positions with options that guard against a sudden decline in the yuan. Create your live VT Markets account and start trading now.

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