China’s factory activity unexpectedly contracts in November

China’s factory activity unexpectedly contracted in November, according to a private survey released Monday; Weak domestic demand continued to cast a shadow over the world’s second largest economy.

RatingDog China General Manufacturing PMI, conducted by S&P Global, fell to 49.9 in November, missing analysts’ expectations of 50.5 in a Reuters poll. A reading above the 50 indicator level indicates expansion, while a reading below it indicates contraction.

The official manufacturing PMI released on Sunday showed China’s factory activity contracted for an eighth month in November, coming in at 49.2, marking a modest improvement from 49.0 in the previous month.

The private survey, formerly known as Caixin/S&P Global PMI, painted a better picture than official surveys in recent years as it focused more on export-oriented manufacturers.

RatingDog’s exclusive survey covers 650 manufacturers and collects responses in the second half of each month; The official PMI surveys a broader sample of more than 3,000 companies at the end of the month.

The official non-manufacturing PMI, which covers construction and services, fell to 49.5, marking the first contraction for the index since December 2022. official data showedIt is affected by weakness in the real estate and housing services sectors.

The readings provided an early insight into where the economy was doing in November, following a raft of data showing the economic slowdown worsened in the final quarter of this year.

Fixed asset investment, which includes real estate, fell by 1.7% in the first ten months of the year; This has reached levels not seen since the pandemic emerged in 2020. In October alone, fixed asset investment fell 11.4% year-on-year, the worst reading since the beginning of 2020.

While industrial production increased by 4.9% in October compared to the previous year, growth in retail sales slowed for the fifth consecutive month, falling to 2.9%. Both recorded their weakest levels since August 2024, according to LSEG data.

Signaling further economic distress, China’s exports unexpectedly contracted for the first time in nearly two years in October, falling 1.1% annually as businesses’ front-loading momentum waned.

Tommy Xie, managing director and head of Asia macro research at OCBC Bank, said recent economic data shows China’s growth will likely fall below 4.5% in the fourth quarter, down from 4.8% growth in the third quarter.

The economist pointed to the Politburo meeting and the Central Economic Work Conference later this month for signals on next year’s economic policy priorities.

But tensions with the United States eased following a temporary trade truce following President Donald Trump’s meeting with Chinese leader Xi Jinping in South Korea in late October. Washington agreed to roll back high tariffs on Chinese exports in exchange for Beijing cracking down on the illegal fentanyl trade, pausing export controls on rare earths and resuming purchases of American soybeans.

The United States also agreed to suspend port fees on Chinese ships for a year and plans to ban some Chinese companies from its technology.

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