October PMI Indicates Growth Among Smaller Manufacturers
China’s manufacturing sector witnessed a return to growth in October, as smaller manufacturers reported expansion. According to a private survey by Caixin/S&P Global, the Manufacturing Purchasing Managers’ Index (PMI) hit 50.3, surpassing the forecasted 49.7 from a Reuters poll. A PMI above 50 signifies growth, while below 50 indicates contraction.
Recovery in Domestic Orders Drives Expansion
The Caixin survey, which focuses on private-sector and export-driven firms, noted increased demand in October. New domestic orders grew at the fastest pace in four months, showing stronger underlying demand in China’s market. However, export orders continued to decline, and manufacturers remained cautious with workforce numbers.
Government Stimulus Measures Contributing to Growth
Economists highlight that China’s recent government stimulus measures are supporting this recovery. In September, the People’s Bank of China cut the reserve requirement ratio (RRR) for banks and lowered the repurchase rate to increase lending, aimed at boosting economic activity. Andy Maynard, managing director at China Renaissance, viewed this as an encouraging early stage of recovery.
Challenges and Uncertainties in Sustaining Growth
Despite positive trends, challenges persist for China’s economy. Gary Ng, senior economist at Natixis, warned that intense domestic competition and global protectionism could affect demand. The industrial utilization rate remains below historical averages, raising questions about the sustainability of growth.
Upcoming Fiscal Stimulus Plans Expected
China’s parliament is set to meet next week, with possible fiscal stimulus announcements expected on November 8. This pro-growth stance aims to boost manufacturing recovery and support further economic stability in the world’s second-largest economy.
