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Manufacturing activity in China continues to show signs of recovery, especially among small and medium-sized companies, thanks to the recent economic stimuli implemented by the government.
According to the Caixin/S&P Global Purchasing Managers’ Index (PMI), it reached 51.5 in November, beating the expectation of 50.5 in a Reuters poll. This is the second consecutive month in which it remains above the 50 threshold, which separates expansion from contraction.
The boost of new orders and exports
Manufacturing sector growth was led by a rise in new orders, the largest in three years, according to Wang Zhe, an economist at Caixin Insight Group. In addition, the report highlights a recovery in exports, suggesting that the stimuli are beginning to be reflected in the economy.
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The official PMI, which mainly includes state-owned companies and large firms, also showed a slight increase, standing at 50.3 in November compared to 50.1 in October. This result underlines an initial stabilization in the sector.
Economic stimuli and challenges
China has rolled out a series of measures to revive its economy, including cutting the bank reserve ratio by 50 basis points and approving a 10 trillion yuan ($1.4 trillion) plan to address local debt problems.
In addition, efforts have been intensified to stabilize the real estate sector, which continues to show weaknesses, with a 10.3% drop in investment during the first ten months of the year.
Despite these positive signs, challenges remain. According to Gary Ng, an economist at Natixis, a sustained recovery will depend on an improvement in consumer and business confidence. Risks such as price wars and geopolitical tensions that could impact key sectors in 2025 are also mentioned.
Impact of trade tensions with the United States
Donald Trump’s recent presidential victory has generated uncertainty about the possible reimplementation of tariffs on Chinese products. According to Capital Economics’ Julian Evans-Pritchard, this threat could be temporarily boosting Chinese exports as American companies look to get ahead of potential tariffs.
A change of direction?
Although recent data suggests a nascent recovery, the Chinese economic outlook remains mixed, with sectors such as real estate and industrial profits facing significant declines. However, fiscal and monetary stimulus, along with stronger export demand, could set the stage for a more sustained recovery in 2024.
The focus will be on how domestic politics and international trade tensions will influence the course of the world’s second-largest economy in the coming months.
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