China’s Manufacturing Activity Grows

BEIJING (Reuters) – China's manufacturing activity returned to growth in October, spurred by increased new orders and production, marking an improvement at the start of the final quarter, according to a private-sector survey released on Friday.

The Caixin/S&P Global Manufacturing PMI rose to 50.3 in October from 49.3 the previous month, surpassing analysts' expectations from a Reuters poll, which predicted a reading of 49.7.

This uptick mirrors an official survey from Thursday indicating manufacturing activity expanded for the first time since April. This stabilizing trend has been bolstered by stimulus measures introduced in late September as Beijing aims to steer economic growth toward a target of roughly 5% for the year.

Markets are on the lookout for details regarding new debt provisions to rejuvenate the vulnerable economy, given ongoing challenges like a languishing property market and historically low consumer confidence, which continue to hinder recovery in the world's second-largest economy.

Reuters reported on Tuesday that the government is contemplating approval next week for debt issuance exceeding 10 trillion yuan (approximately $1.4 trillion) in the upcoming years.

Per the Caixin survey, new orders for Chinese manufacturers increased at the fastest rate in four months, consequently propelling production expansion to its highest rate since June. Manufacturers also expressed improved confidence regarding future output as their optimism rebounded from September's lows to the most elevated level observed in five months.

Additionally, purchasing activity rose in response to the increase in new work, leading to a build-up of purchase stocks. Manufacturers noted a rise in post-production inventory due to delays in outbound shipments coupled with increased production.

Both input and output prices experienced slight increases in October. However, new export orders declined for the third consecutive month, although the contraction was less severe than in the preceding month.

Investors are concerned that a potential victory for Republican candidate Donald Trump in the upcoming U.S. presidential election, along with a rise in tariffs on Chinese goods, could adversely affect Chinese exports, which have been a rare bright spot this year.

Despite improved work inflows, the pace of job losses in factories was the quickest since May 2023. Anecdotal evidence indicated that firms reduced temporary workers and hesitated to replace departing staff in October.

Wang Zhe, a senior economist at Caixin Insight Group, noted, "The labor market remains under pressure, and price levels are still subdued. Additionally, achieving China's 2024 growth target will depend on a sustained recovery in consumer demand, meaning policy efforts should focus more effectively on increasing household disposable income."

> ($1 = 7.1193 Chinese yuan)