China’s Manufacturing Sector Shows Growth in October Amid Renewed Demand

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Overview of Manufacturing Activity

China’s manufacturing sector showed signs of renewed growth in October, with smaller manufacturers reporting expansion, according to a private survey released on Friday. The Caixin/S&P Global Manufacturing Purchasing Managers’ Index (PMI) reached 50.3, surpassing expectations of 49.7 from a Reuters poll. A PMI above 50 indicates growth, while below 50 suggests contraction.

Comparison with Previous Months

This October reading improved from September’s 49.3 and indicates a steady recovery in market demand. The Caixin survey, which focuses on private and export-driven firms, contrasts slightly with official government data that highlights large, state-owned companies but also confirmed growth for the first time since April.

Insights from Economists

Wang Zhe, a senior economist at Caixin Insight Group, noted that both supply and demand expanded steadily, with new domestic orders increasing at the fastest rate in four months. However, export orders continued to decline, and workforce numbers remained cautious.

Analysts view this as a positive response to China’s recent stimulus efforts. In September, the People’s Bank of China reduced the reserve requirement ratio for banks and cut the repurchase rate, moves intended to boost lending and stimulate economic activity.

Market Reactions and Future Outlook

Andy Maynard, managing director at China Renaissance, pointed out that the measures have been well received, but early recovery signs need to be closely monitored. Gary Ng, a senior economist at Natixis, added that China’s pro-growth approach offers hope for stronger demand but cautioned about challenges ahead, including competition within China and global protectionism.

The Chinese parliament is scheduled to meet next week, with expectations that further fiscal stimulus details could be announced following its conclusion on November 8.

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