China’s factory sector unexpectedly slipped back into contraction in November, according to a private survey released Monday, signaling continued softness in domestic demand and renewed concerns over the country’s economic momentum.
The RatingDog China General Manufacturing PMI, compiled by S&P Global, dropped to 49.9 last month, below market expectations of 50.5 in a Reuters poll and under the threshold dividing expansion from contraction.
The decline marks a reversal from September and October, when the private index showed expansion.
The private survey—typically more reflective of export-driven manufacturers than the official index—fell from 51.2 in September and 50.6 in October.
Private and official PMIs signal ongoing manufacturing strain
The private PMI data followed the official National Bureau of Statistics reading released Sunday, which showed factory activity shrinking for an eighth straight month.
China’s official Manufacturing PMI registered at 49.2, inching up slightly from 49.0 in October but staying below 50.
The RatingDog survey gathers responses from 650 manufacturing firms during the latter half of each month, compared with more than 3,000 firms surveyed by the official index at month-end.
Despite a notable pickup in export orders—rising at the fastest pace in eight months according to RatingDog—the sector overall showed signs of strain. New domestic orders nearly stalled in November, halting production growth.
“Manufacturing production growth came to a halt as new orders nearly stalled in November,” S&P Global and RatingDog noted.
Yao Yu, founder of RatingDog, said manufacturers cut staffing, reduced purchasing, and adopted more cautious inventory strategies amid weaker business inflows.
Yu expects only a “weak expansion” in December as policymakers work toward an annual GDP growth target of around 5%.
Non-manufacturing activity also showed weakness.
The official services and construction PMI dropped to 49.5—the first contraction since December 2022—reflecting pressures in real estate and residential service industries.
Investment weakness and property decline shape broader slowdown
The survey figures add to a run of disappointing economic data that has weighed on confidence in recent months.
China’s fourth-quarter performance appears to be slowing after earlier momentum faded, dragged by a prolonged property downturn, cooling domestic consumption, and shrinking industrial investment.
Fixed-asset investment fell 1.7% in the first ten months of the year, its weakest stretch since the onset of COVID-19 in 2020.
In October alone, investment declined 11.4% year on year, the steepest drop since early 2020.
Property investment continued to contract, shrinking 14.7% over the same period, worse than the 13.9% decline reported for the first three quarters.
Industrial output grew 4.9% year on year in October, but retail sales slowed for a fifth consecutive month to 2.9%, both the weakest readings since August 2024.
October exports fell unexpectedly by 1.1% from a year earlier, marking the first contraction in nearly two years.
Outlook hinges on policy signals and stabilization efforts
Economists warn that China’s growth could slip below 4.5% in the fourth quarter, down from 4.8% in Q3.
Analysts are now watching the upcoming Politburo meeting and Central Economic Work Conference for guidance on 2025 policy direction.
While trade tensions with the US eased after tariff rollbacks and a temporary truce in late October, economists at Bank of America noted that a meaningful demand recovery may remain difficult.
Deflation risks may persist into next year as consumption and investment struggle to regain strength.
Market reaction was cautiously positive: the CSI 300 rose 0.73% on Monday, while Hong Kong’s Hang Seng gained 0.56%. The offshore yuan last traded at 7.08 against the US dollar.
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