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China’s factory activity fell for an eighth straight month in November while activity in services hit a three-year low, showing how persistent weak demand is affecting the country’s economic outlook despite a trade truce with the US.
The manufacturing purchasing managers’ index rose marginally to 49.2 this month, according to official data released on Sunday. A reading below 50 shows a contraction in activity.
Another index tracking non-manufacturing business sectors, including services and construction, fell to 49.5, down from 50.1 last month. It is the first reading below 50 in nearly three years.
The results were driven by seasonal factors and the fading effect of a boost in consumption during a week-long public holiday in October, said Huo Lihui, chief statistician of the service industry survey centre of the National Bureau of Statistics.
The data follows efforts by China and the US to curb hostilities over trade, following a meeting last month between presidents Xi Jinping and Donald Trump. The countries agreed to postpone reciprocal export restrictions and China also agreed to resume purchases of American soyabeans, a point of contention between the two sides on trade.
Underlining China’s efforts to increase its self-reliance in technology, the PMI readings in November showed fast expansion in railway transport, telecommunications, broadcasting and satellite transmission services.
In contrast property and household services stayed below 50, “signalling persistently weak market vitality”, Huo said.
Chinese policymakers are struggling to rein in overcapacity and excessive competition in some industries — a problem Beijing calls “involution” — while addressing weak consumer confidence and deflationary pressures during a property market downturn and weak jobs market.
Official data showed annual retail sales rose only 2.9 per cent in October, their slowest pace in over a year. Throughout the year the government has tried to increase domestic demand through a trade-in programme that allows households to buy subsidised goods but overall consumption remains subdued.
However analysts still believe China will move cautiously on any further consumption stimulus or subsidy programmes for next year. China will hold its central economic conference — a key annual meeting to set its economic agenda for 2026 — later in the month.
“We maintain our view that government may hold off on major policy support until Q1 next year, since this year’s growth target appears broadly achievable,” Goldman Sachs analyst Yuting Yang said in a Sunday note, adding that the anti-involution campaign might help ease deflationary pressure in upstream sectors.
“Trump tariffs haven’t impacted China’s economy much, so policymakers can save policy ammunition for the future,” said Larry Hu, China economist at Macquarie in Hong Kong. “We expect policymakers to calibrate stimulus based on the GDP target — neither missing nor overachieving it.”
Additional contributions from Cheng Leng in Beijing