Chinese Manufacturing Sector Shows Signs Of Slowing

China's manufacturing PMI contracts to 49.4, signaling economic slowdown despite efforts to boost growth.

What does China's PMI contraction mean for its economy?

China's manufacturing sector experienced a contraction for the second consecutive month in November, signifying a slowdown in the nation's economy. Despite government efforts to stimulate growth, the official manufacturing purchasing managers' index (PMI) fell to 49.4, below both the previous month's figure and median Bloomberg poll forecasts.

The downturn in manufacturing is part of a broader economic challenge facing China, including a troubled property sector and a need for revitalization in the broader economy. This contraction contradicts the optimism spurred by the 4.9% year-on-year GDP growth observed in the third quarter, which had suggested a potential recovery post-pandemic.

Services Sector Also Experiences Weakening

The non-manufacturing PMI, encompassing the services sector, recorded a marginal increase to 50.2. However, this is the lowest it has been since the Covid surge in December and falls short of analyst expectations. The services industry, a critical component of China's economy, also showed signs of weakening, with its activity index contracting to 49.3.

Frederic Neumann, HSBC's chief Asia economist, expressed concern over the slowing services sector, which had been anticipated as a key driver of economic strength. The loss of momentum in this sector adds complexity to the economic landscape.

Economic Outlook And Policy Implications

With industrial company profits also slowing, the pressure is mounting on Chinese authorities to introduce further support measures. Analysts predict that without additional policy intervention, the economy may struggle to achieve a 5% growth rate in the forthcoming year.

China’s Economic Recovery Shows Mixed Signals
October’s economic data from China paints a mixed picture, with retail and industrial sectors showing growth, while the property sector and fixed-asset investments lag.

Nomura analysts, who had anticipated a PMI of 49.3 for November, foresee further economic downturns towards the end of the year and into early 2024. They highlight the weakening property sector and subdued external demand for Chinese goods as significant factors. Investment in green industries, although a potential growth area, could also reach its peak soon.

Nomura suggests that the economic challenges may prompt Beijing to adopt more robust support measures, potentially acting as a lender of last resort to rescue major developers and address the funding gap in the housing sector.


Subscribe to our newsletter and follow us on X/Twitter.

Great! You’ve successfully signed up.

Welcome back! You've successfully signed in.

You've successfully subscribed to REX Wire.

Success! Check your email for magic link to sign-in.

Success! Your billing info has been updated.

Your billing was not updated.