China’s Manufacturing Activity Sees Improvement in September Despite PMI Remaining in Contraction Mode

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China’s Manufacturing Activity Sees Improvement in September Despite PMI Remaining in Contraction Mode

China’s Manufacturing Activity Shows Resilience Amid Economic Challenges

A worker inspects a completed vehicle at Zeekr’s electric vehicle production line in Ningbo, China, on May 29, 2025, demonstrating the ongoing development in China’s manufacturing sector. Recent data from the National Bureau of Statistics revealed that the Manufacturing Purchasing Managers’ Index (PMI) registered at 49.8 in September, indicating a less severe contraction than expected. Analysts had anticipated a PMI reading of 49.6, following a Reuters poll, marking the sharpest performance since March.

Key Insights into China’s Manufacturing PMI

Despite remaining below the crucial 50-mark that differentiates growth from contraction, this month’s manufacturing PMI highlights a modest recovery in the sector, driven largely by improvements in production capacities and domestic order flows. Key findings include:

The production sub-index surged to a six-month high of 51.9, pointing to an uptick in manufacturing activities.
New orders rose slightly to 49.7, indicating gradual improvements in demand.
The index for manufacturer inventories increased to 48.5, suggesting that material stockpiles are decreasing at a slower rate.

This notable enhancement reflects solid performance in sectors such as high-tech, consumer goods, and essential equipment manufacturing, as observed by Lihui Huo, chief statistician at the National Bureau of Statistics.

Comparative Analysis of Private Manufacturing Surveys

Adding to the overall narrative, private surveyor RatingDog released its own manufacturing PMI, which indicated a robust reading of 51.2 for September, surpassing the forecast of 50.2. This marks RatingDog’s highest score since May, driven by an increase in both domestic and export orders. Unlike official PMI metrics that encompass over 3,000 firms at month-end, RatingDog’s survey involves 650 manufacturers and captures responses in the latter half of the month, which often presents a clearer picture of the export-focused manufacturing landscape.

Challenges Facing the Chinese Economy

Recently, a range of economic indicators pointed towards a slowdown in the world’s second-largest economy. Retail sales growth has weakened for three consecutive months, and the consumer price index is once again experiencing declines, highlighting a drop in domestic consumption. Despite this, industrial profits saw a double-digit increase in August year-over-year, attributed to Beijing’s efforts to mitigate supply excesses and combat aggressive price competitions.

Future Economic Outlook and Government Plans

Upcoming meetings of China’s Politburo, set for October, are anticipated to provide insights into the government’s economic strategies in response to this slowdown. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, remarked that given the GDP growth of over 5% in the first half of the year, the government seems poised to accommodate a slowdown in the latter half as long as it aligns with the full-year growth objective of 5%.

China’s economy achieved a commendable 5.3% growth in the first half of the year, positioning it favorably to meet its annual growth target. However, achieving an average growth rate of 4.5% from 2026 to 2035 presents its own challenges, particularly as current GDP per capita, adjusted for inflation, is comparable to Japan’s in the late 1970s, according to Larry Hu, chief China economist at Macquarie.

As China navigates this complex economic landscape, continued monitoring of manufacturing and economic indices will be crucial in assessing the country’s growth trajectory moving forward.