Poll results claims that China’s manufacturing activity is likely to contract for the second consecutive month

As November concludes, a Reuters poll indicates that China’s manufacturing activity is poised to contract for the second consecutive month, with the official Purchasing Managers’ Index (PMI) expected to remain below the critical 50-point threshold that separates contraction from expansion. Despite predictions of a slight improvement to 49.7 from last month’s unexpected drop to 49.5, the consensus is that the economy is still struggling for traction. While some economists have noted green shoots in mixed October data, challenges persist, including difficulties in the property market, risks associated with local government debt, slow global growth, and geopolitical tensions.

Despite several policy support measures, such as a series of stimulus efforts, China’s economic challenges endure. Profit growth at the country’s industrial firms slowed in the last month, returning to low single digits. Both new export and import orders contracted in October, underscoring the headwinds faced by the manufacturing sector.

Analysts caution that China could face stagnation similar to Japan later in this decade unless policymakers take decisive steps to reorient the economy toward household consumption and market-allocation of resources. While China’s central bank governor expressed confidence in the country’s healthy and sustainable growth in 2024 and beyond, he stressed the need for structural reforms to reduce reliance on infrastructure and property for growth.

The pursuit of an annual economic growth target of ‘around 5 per cent’ for the next year may require additional stimulus measures, aligning with the goals set for this year. The official PMI, a crucial economic indicator, is set to be released on Thursday, providing further insights into the state of China’s manufacturing sector. Simultaneously, the private Caixin factory survey, scheduled for Friday, is anticipated to show a slight uptick to 49.8 from October’s 49.5. The outcomes of these reports are likely to influence policymakers’ decisions as they navigate the complex economic landscape and consider further measures to sustain growth and stability.