Macro
China Factory Activity Slips Back Into Contraction in October as Export Orders Weaken
The official manufacturing PMI fell to 49.3 from 50.1, though high-tech manufacturers kept expanding.
By Emma Cruz ·
China's factory sector shrank again in October, with the official manufacturing purchasing managers' index falling to 49.3 from 50.1 in September, according to data from the National Bureau of Statistics released on Saturday [1][2]. A reading below 50 indicates contraction, and the drop reversed September's brief return to growth after an August reading of 49.8 [1].
The weakness was broad. The production sub-index fell 1.9 points to 49.8 and the new orders gauge dropped 1.1 points to 49.4, according to Xinhua, the state news agency [2]. New export orders slid to 48.7 from 50.0 in September, the Associated Press reported, a notable shift for an economy that has leaned on overseas sales to offset soft demand at home [1]. Price pressures also eased: the input price sub-index fell 4 points to 56.8 and the gauge of prices factories charge dropped 2.3 points to 51.7 [2].
Large companies held up better than smaller ones. The index for large enterprises stood at 50.2, while medium-sized companies came in at 48.4 and small firms at 47.5, Xinhua reported [2]. High-tech manufacturing remained in expansion at 51.3 and equipment manufacturing at 50.6, with production and new orders in railway, shipbuilding, aerospace and electronics equipment at 53 or higher [2].
Huo Lihui, chief statistician at the statistics bureau, attributed part of the slowdown to demand that was pulled forward ahead of the National Day holiday and to a complex international environment, according to Xinhua [2]. The official data agency's reading came alongside earlier figures showing the economy grew 4.5% from a year earlier in the third quarter, up from 4.3% in the second, and 4.6% over the first three quarters, in line with the government's annual target [2]. Wen Bin, chief economist at China Minsheng Bank, expects fourth-quarter growth of 4.6% to 4.7%, Xinhua reported [2].
Trade remains the central issue for global markets. Chinese companies have been shipping more goods abroad because domestic demand has been held back by a long property downturn, and exports to Europe, Southeast Asia and Latin America have grown since the United States raised tariffs last year, according to the AP [1]. That has drawn complaints from trading partners. The European Union says its deficit with China reached $1.1 billion a day in 2025 and has taken steps to rebalance trade, including an agreement to cap imports of Chinese hybrid vehicles [1]. Some economists expect China's 2026 trade surplus to exceed the record $1.2 trillion posted in 2025 [1].
The diplomatic calendar is also active. German President Frank-Walter Steinmeier, speaking at a Beijing university, said it was "understandable that China wants to protect its economy against external shocks," while warning that this should not leave other countries increasingly dependent on China, the AP reported [1]. Premier Li Qiang told Steinmeier on Friday that China was willing to import more high-quality German products [1]. U.S. President Donald Trump is expected to meet Chinese leader Xi Jinping in mid-November at the APEC summit in Shenzhen, where trade is likely to be discussed [1].
For markets, a softer Chinese factory sector matters for demand for industrial metals and energy and for the outlook for companies that sell into China. A drop in export orders also bears on whether China's trade surplus keeps widening, a source of friction with Europe and the United States.
What to watch next: the private-sector manufacturing survey, October trade figures, any new stimulus signals from Beijing, and the Trump-Xi meeting at APEC in Shenzhen.
Sources:
[1] Associated Press (via News4JAX), "China's factory activity slips as new export orders weaken", October 31, 2026. https://www.news4jax.com/business/2026/10/31/chinas-factory-activity-slips-as-new-export-orders-weaken/
[2] Xinhua, "Economic Watch: China's manufacturing PMI softens, high-tech sector maintains expansion", October 31, 2026. https://english.news.cn/20261031/d98d1f3fa92a45d6a26f234849bd4957/c.html
This article was produced with AI assistance. It is for informational purposes only and is not financial advice. StockVolt and its authors may hold positions in securities mentioned.