China’s manufacturing sector faced a tough month in October, contracting to its lowest level in six months. The official purchasing managers’ index (PMI) dropped to 49.0, down from 49.8 in September. A score under 50 indicates a decline in activity, signaling a deeper slowdown.
This downturn comes amid renewed trade tensions with the U.S., intensifying concerns in an already complex international environment. Sub-indexes for production, new orders, and employment all fell, indicating weak demand.
Interestingly, the non-manufacturing PMI rose slightly to 50.1, supported by a boost in transportation and entertainment due to the recent Golden Week holiday. However, the overall composite PMI dipped to 50—the lowest since December 2022.
Huo Lihui, chief statistician at the National Bureau of Statistics (NBS), linked this slowdown to factory shutdowns during the holiday and ongoing trade strains. As of now, manufacturing activity has been contracting since April, when trade tensions escalated following tariff increases under the Trump administration.
Despite challenges, China’s economy grew by 4.8% in the third quarter, the slowest growth in a year. Fixed-asset investment also fell by 0.5% in the first nine months, the first decrease since 2020. However, profits for larger industrial companies surged 21.6% in October compared to last year.
Domestic demand remains weak, influenced by a sluggish property market and soft labor conditions. Recent trends show households are feeling the pinch, as spending power diminishes.
On a brighter note, the U.S. and China recently reached a temporary trade truce. President Trump announced a cut in certain tariffs, which may revive some trade dynamics. Analysts remain cautious, noting that while this truce is a step forward, real issues like Taiwan remain unresolved, leaving the situation fragile.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, suggests that China’s macro policies might stay consistent for the rest of the year, but anticipates a shift to more proactive measures early next year.
For more insights on the economic relationship between China and the U.S., you can check this report from the National Bureau of Statistics.
Staying attuned to these developments can provide a clearer picture of how global markets respond to this evolving landscape.
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