China’s factory activity contracted for an eighth consecutive month in November, suggesting the world’s second-largest economy still faces significant challenges from weak domestic demand and external pressure. The Manufacturing Purchasing Managers’ Index (PMI) registered 49.2 for the month, demonstrating a slight improvement from the 49.0 recorded in October, according to data released by the National Bureau of Statistics (NBS) on Sunday.
Economists generally agree that a reading below the 50-point mark indicates economic contraction, therefore this figure confirms continued subdued performance within the crucial manufacturing sector.
Improvement in Business Sentiment
The slight uptick in the main index occurred just weeks after President Xi Jinping and US President Donald Trump agreed upon a temporary truce in the damaging bilateral trade war in South Korea. The new orders sub-index, which measures manufacturing demand, climbed to 49.2 in November from 48.8 the previous month, reflecting improved business expectations across the supply chain.
NBS Chief Statistician Huo Lihui noted, “Business sentiment has improved; both the supply and demand sides of the manufacturing industry had strengthened, with small enterprises seeing a notable rise in activity.”
The production sub-index also edged up to the expansion threshold of 50.0, rising from 49.7 in September, highlighting a stabilizing output level. Furthermore, Huo specified which industries drove this internal growth, reporting, “The production sub-index and new orders sub-index of industries such as agricultural and sideline food processing and non-ferrous metal smelting and rolling were both in the expansion range, indicating relatively active supply and demand.”
However, sentiment remained weak across sectors like petroleum and coal processing.
Weak domestic demand, crackdowns on competition, and trade tensions weighed down the sector this year, with government efforts to spur consumption faltering amid low confidence and a struggling property market. Fixed-asset investment dropped 1.7% year-on-year from January to October, as infrastructure also dipped 0.1% in the first 10 months. Manufacturing investment growth slowed to 2.7%, with industrial output and retail sales also weakening in October.
Non-Manufacturing Activity Dip
Meanwhile, the non-manufacturing PMI, which gauges activity in the construction and services sectors, unexpectedly dropped to 49.5 in November, marking the first contraction in nearly three years. This decline in services primarily resulted from fading holiday activity and continued weakness in the real estate sector.
Consequently, the official composite PMI, which tracks both sectors, fell to 49.7 from 50.0 in October. Despite these ongoing headwinds and concerns over low consumer confidence, the consensus holds that Beijing will successfully hit its annual growth target of “around 5%” this year.
