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China’s manufacturing growth drops to two years low

Last Updated on 2020/12/06

The official China manufacturing PMI (October) for manufacturing production was 50.2 percentage points – lower than the 50.6 forecast by analysts and down compared to 50.8 in September, according to data from the National Bureau of Statistics, published on Wednesday.

The official reading of SMEs in October was the lowest since July 2016. The sub-indices of production and new orders also fell compared to last month.

The sub-indices that measure the operations of small and medium-sized manufacturing companies indicate a monthly contraction in activity.

China recorded a slowdown in manufacturing growth in October for the second consecutive month, while the controversy over the country’s trade war with the United States continues, affecting mostly smaller companies.

The official reading of SMEs in October was the lowest since July 2016.

New orders for export contracts for the fifth consecutive month also contracted.

A reading above 50 indicates expansion, while a reading below indicates contraction.

October is the first full month following the entry into force of the latest US tariffs. Washington and Beijing have set additional tariffs on their assets on September 24th.

Economic data from China are under observation since the commercial war between the two economic powers broke out.

The Chinese statistician Zhao Qinghe wrote in an analysis that the manufacturing activity in October was affected by long national holidays and a “complex and variable external environment” that caused “fluctuations” in supply and demand.

The PMI for official services also fell to 53.9 in October, from 54.9 in September.

The weakness of Chinese economic activity will probably continue in the winter, said Hao Hong, head of research and chief strategist at the Bank of Communications, citing industrial activity of seasonal slowdown and long lunar new year holidays in February.

China has already posted slower than expected growth of 6.5% in the third quarter of the year, its weakest pace since the first quarter of 2009.

Even before the escalation of trade tensions with the United States this year, Beijing was already trying to manage a slowdown in its economy after three decades of dizzying growth.

The trade war with the United States is now complicating these efforts, with analysts expecting Beijing to increase policy easing measures to deal with threats from bilateral disputes that could derail growth.

The results of another private production survey focused on small and medium-sized businesses will be released on Thursday.

China’s official PMI indicator focuses on large corporations and state-owned companies, while Caixin and IHS Markit’s private survey focuses on small and medium-sized businesses.


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