The Chinese National Bureau of Statistics reported on Friday that manufacturing activity contracted for the seventh consecutive month in October, posting even lower numbers than expected.
China’s Purchasing Managers Index (PMI), the primary metric of factory activity, dropped from 49.8 in September to just 40 in October. The PMI is rated on a scale of zero to 100, with any score less than 50 indicating a contraction. China has consistently had a score below 50 since President Donald Trump announced his “Liberation Day” tariffs in April.
Bureau of Statistics chief analyst Huo Lihui blamed some of the contraction on the Golden Week, the Chinese national holiday observed during the first week of October. This well-known holiday would presumably have been factored into government estimates.
Huo said the manufacturing numbers were even more disappointing than expected due to “a more complex international environment,” an allusion to U.S. tariff policies under President Trump. Huo also noted that Beijing has been attempting to shift more of China’s spending from manufacturing investments to consumer consumption while cracking down on the “excess manufacturing capacity” some industries have developed.
The Chinese government has been alarmed about low spending and weak confidence from consumers as China reports some of its slowest economic growth in decades. The current decline in manufacturing activity is China’s longest factory slump in over nine years. New factory orders in October were the lowest since 2023.
Bloomberg News on Friday spoke with some Chinese exporters who expected demand for their goods to increase thanks to the deal reached between Trump and Xi Jinping this week — although Bloomberg noted “that prospect no longer excites them as it once did” because Trump’s “brinksmanship” makes U.S. demand unpredictable.
Chinese exporters were apparently also less than thrilled about their quest to find alternative buyers outside the United States. “Many analysts predict the final three months of 2025 will see the slowest performance since zero-Covid lockdowns roiled production in 2022,” Bloomberg reported.
“The latest result from the Trump-Xi summit may provide some positives going forward. But policy support will be necessary to stop the deteriorating momentum,” judged Australia & New Zealand Banking Group senior strategist Zhaopeng Xing.
Beijing has been very reluctant to authorize large-scale stimulus spending even as both domestic and international analysts say nothing else is likely to revive China’s moribund consumer spending.
“The challenges at home include youth unemployment, a threadbare social welfare system, and an aging population. But the government has failed to take on these problems aggressively, instead tinkering with incremental policy changes and doubling down on investing in the factories that generate goods for export,” the left-wing New York Times (NYT) pointed out this month.
The NYT quoted economists who said China’s core problem is that it never really emerged from the “funk” of the Covid-19 lockdowns, leaving households with less income than before the pandemic coupled with rising costs of living. The decline of China’s property market also left consumers reluctant to make major purchases, complicating Beijing’s plans to make the economy less dependent upon exports.
