HONG KONG (AP) – In November, China's factory activity continued to contract for the eighth consecutive month, as indicated by an official survey released on Sunday. This decline emphasizes the ongoing challenges facing China's economy, even in the wake of a U.S.-China trade truce.
The official manufacturing purchasing managers index (PMI) saw a slight increase to 49.2 in November, up from 49 in October, according to China's National Bureau of Statistics. The PMI operates on a scale from 0 to 100, with any reading below 50 signifying contraction. This latest contraction aligns with analysts' expectations.
Earlier in November, a U.S. tariff cut was announced, which could potentially enhance the competitiveness of Chinese exports in the U.S. market. However, it remains uncertain whether Chinese exports have regained momentum following the recent trade agreement. U.S. President Donald Trump stated that the U.S. would reduce tariffs on Chinese goods after meeting with Chinese leader Xi Jinping in South Korea on October 30, fostering some optimism regarding Chinese exports and manufacturing sectors.
Despite these hopeful signs, the lingering slump in China's property market and declining home prices have negatively impacted consumer confidence. Real estate investments are in decline, and fierce price competition in various sectors, including the automotive industry, continues to exert pressure on businesses. Economists emphasize the need for more substantial government policy support to rejuvenate the economy amidst these persistent issues.
Lynn Song, chief economist for Greater China at ING bank, noted in a recent report that policymakers appear hesitant to implement further policy support. While the Chinese government has previously introduced measures like trade-in subsidies for home appliances and electric vehicles, many of these incentives are set to be phased out, potentially leading to decreased sales and demand, according to analysts.
The reduction in support from consumer goods trade-in policies may adversely affect domestic demand for manufactured goods. Zichun Huang, a China economist at Capital Economics, highlighted that signals regarding domestic demand have been inconsistent.
The Chinese government has set an economic growth target of approximately 5% for the entirety of 2025, while the economy grew by 4.8% during the July-September quarter. Lynn Song indicated that achieving this year's growth target likely necessitates minimal additional support.
As the challenges facing China's economy persist, the need for effective policy support remains crucial for revitalization and growth in the coming months.
