China’s factory activity contracts again despite truce
China’s factory activity contracted for the eighth consecutive month in November; This underlined the challenges facing the country’s economy despite the US-China trade truce.
The official manufacturing purchasing managers’ index rose slightly to 49.2 in November from 49 in October, China’s National Bureau of Statistics said on Sunday.
PMI is measured on a scale from 0 to 100, and a reading below 50 indicates contraction. The shrinkage was in line with analysts’ expectations.
The US cut tariffs earlier this month is likely to mean that Chinese exports could become competitive in the US market, but it may be too early to tell whether exports are regaining momentum following the trade truce.
After meeting with Chinese leader Xi Jinping in South Korea on October 30, US President Donald Trump said that the US would reduce customs duties on Chinese goods, increasing optimism about China’s exports and production.
The prolonged decline in the Chinese real estate market and falling house prices are still hurting consumer confidence, and real estate investment is also in decline.
Intense price competition in many sectors, including the automotive industry, also puts pressure on many businesses.
Economists said more government policy support was needed to help revive the economy.
But “policymakers appear to be delaying further policy support,” Lynn Song, chief economist for Greater China at ING Bank, wrote in a note earlier this month.
Although Chinese authorities have previously introduced measures such as trade-in subsidies for home appliances and electric vehicles, some of these subsidies will be phased out and sales and demand will likely decline, analysts said.
Weakening support from consumer goods swap policies could weigh on domestic demand for manufactured goods, and “signals on domestic demand are mixed,” Zichun Huang, China economist at Capital Economics, said last week.
Chinese authorities have set an economic growth target of around 5 percent for the whole of 2025. The economy grew by 4.8 percent in the July-September quarter.
“Minimal additional support will likely be required to achieve this year’s growth target,” Song wrote.
