Factory activity in China showed a slight improvement in November, edging up to a purchasing managers’ index (PMI) of 49.2, according to the National Bureau of Statistics. This marks the eighth consecutive month of contraction, with the figure only 0.2 points higher than October’s. Notably, this index remains below the critical 50-point threshold that signifies expansion.
In contrast, the non-manufacturing business activity index fell to 49.5, a decline of 0.6 points from the previous month. The composite PMI also slipped to 49.7, indicating a slight downturn in both manufacturing and services sectors, as the boost from seasonal holidays diminished.
Huo Lihui, the chief statistician at the bureau’s Service Industry Survey Center, noted a modest improvement in manufacturing supply and demand. The production index reached the pivotal 50-point mark, while new orders increased to 49.2. Interestingly, high-tech manufacturing continued to thrive for the tenth consecutive month, recording an expansion PMI of 50.1. However, the equipment manufacturing and consumer goods sectors fell below 50, signaling contraction in those areas. Energy-intensive industries showed a mild recovery, rising to 48.4, an increase of 1.1 percentage points since October.
Small enterprises reported a notable uplift, with their PMI jumping 2 percentage points to 49.1—its highest level in nearly six months. Medium-sized firms marginally improved to 48.9, while large manufacturers experienced a downturn, with the PMI dropping to 49.3. Despite these challenges, market confidence managed a slight rise, with expectations for production and operations increasing to 53.1. Specific industries, notably non-ferrous metal smelting and aerospace-related equipment, exhibited particularly robust sentiment, achieving readings above 57.
On the service side, non-manufacturing activity waned, heavily influenced by a downturn in services. Huo attributed this decline to the diminishing effects of holiday-related spending following China’s Golden Week, which took place from October 1 to 8. Service-sector activity decreased to 49.5, down by 0.6 percentage points from October, although certain segments remained strong—railway transportation, telecommunications, broadcasting, satellite transmission, and financial services all recorded results above 55. Conversely, the real estate sector continued to show signs of weakness, remaining below the 50-mark, with construction activity improving slightly to 49.6 due to stronger growth expectations.
The non-manufacturing new orders index fell to 45.7, indicating weak demand. While input prices rose to 50.4, service-sector sales prices narrowed their decline, remaining below the 50 mark. Employment in manufacturing increased marginally to 48.4, while the non-manufacturing employment index slightly improved to 45.3. Moreover, supplier delivery times for factories improved to 50.1.
China’s monthly PMI readings, derived from approximately 3,200 manufacturers and 4,300 non-manufacturing firms, serve as a critical indicator of economic momentum. The manufacturing sector has faced challenges since April, coinciding with new U.S. tariffs imposed by President Donald Trump, leading to significant pressures on producers.
In a concerning development, industrial profits fell 5.5% in October, marking the steepest decline since June, and reversing previous gains from the summer. Earnings for major industrial firms saw a growth of only 1.9% over the first ten months, a slowdown compared to earlier gains. Overall, the Chinese economy has moderated, with growth slowing to 4.8% in the third quarter.
Trade tensions between China and the U.S. have escalated, particularly in October when new tariffs loomed before both nations reached a temporary agreement in South Korea. This deal provided some relief by reducing certain tariffs and allowing for resumed agricultural purchases. Despite this truce, domestic demand remains lackluster, hampered by ongoing property market struggles and weak labor conditions, which are negatively impacting consumer spending. Policymakers are signaling a gradual shift towards boosting consumption and tech self-reliance but have refrained from implementing significant new stimulus measures, aiming to adhere to the country’s 5% growth target.
