Manufacturing PMI Rises for Three Consecutive Months

In recent months, a combination of existing policies and new proactive measures has started to show a positive impact on China's economic growth, particularly in the manufacturing sector. The National Bureau of Statistics reported that in November, the Purchasing Managers Index (PMI) for manufacturing reached 50.3%, marking a 0.2 percentage point increase from October. This steady rise over three consecutive months signifies a transition into expansion territory, with experts suggesting that macroeconomic policies are likely to intensify to address external challenges and solidify the foundation for economic recovery.

Manufacturing demand has notably improved. Various indices related to the manufacturing sector—such as the production index, procurement index, new orders index, and business activity confidence index—have all seen increases compared to October. Zhang Li Qun, a special analyst with the China Federation of Logistics and Purchasing, remarked that the manufacturing PMI indicates clearer signs of economic recovery, with a strengthening effect on business confidence due to the implementation of new policies.

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Digging deeper into the sub-indices, November’s figures reveal that the production index and new orders index reached 52.4% and 50.8%, respectively, both showing an increase from October. "On the supply side, both the improvement in market demand and supportive policies have encouraged companies to boost production willingness further," noted Wen Tao, an analyst from the China Logistics Information Center. The consistent rise over three months, particularly since September, reflects a quickening of manufacturing activities and an ongoing enhancement of economic vitality.

This positive momentum was also evident in the new orders index, which rose by 0.8 percentage points in November, its first time entering the expansion zone since May. Additionally, the new export orders index registered at 48.1%, up by 0.8 percentage points, indicating an overall improvement in manufacturing demand. Chief economist and director of research at Minsheng Bank, Wen Bin, identified that the enhancement in domestic demand, coupled with the sustained effects of existing and new policies, contributed to this positive trend in exports. He associated the improvements in exports with a phenomenon referred to as "rush for exports," influenced by expectations surrounding tariff increases and resilient foreign demand.

Certain key sectors, particularly consumer goods and high-tech manufacturing, also demonstrated stability and growth in their PMIs. For instance, in November, the PMIs for high-tech manufacturing and consumer goods industries were reported at 51.2% and 50.8%, representing increases of 1.1 and 1.3 percentage points from October, respectively. "The old-for-new replacement policies have particularly benefited the electrical machinery and automotive manufacturing sectors, resulting in improved industry conditions," added Zhang Wenlang, chief macro analyst at CICC.

While the manufacturing sector shows signs of strengthening, the non-manufacturing sector has faced challenges. In November, the non-manufacturing business activity index fell by 0.2 percentage points compared to October, reflecting the ongoing impact of a potential dip in construction activity and the conclusion of the National Day holiday effects, landing just on the threshold of expansion. Within this sector, the services subsector maintained its momentum, with a business activity index of 50.1%, remaining firmly in the expansion zone.

Business activity linked to consumer travel, including retail, accommodation, and catering services, showed varying degrees of decline. However, industries such as telecommunications, broadcasting, and satellite transmission services, along with internet software and information technology services, thrived, with business activity indices above 55%, indicating robust vitality in those areas. Wu Wei, analyst at the China Logistics Information Center, emphasized that the continued vibrancy of the internet software and IT services sector signals an ongoing empowerment of new economic drivers and productive capabilities fueled by technological innovation and economic transformation.

Financial activities related to the banking and capital market sectors have also been thriving. In November, the business activity index for the financial industry surged above 60%, with the monetary finance and capital market service sectors reflecting substantial ongoing activity. Analysing the trends, Wu noted that a rise in societal financing demand suggests favorable conditions for the financial industry, especially in loan issuance and capital market financing.

Looking ahead, the overall economic indicators suggest that positive changes are accumulating, and manufacturing enterprises are gradually becoming more optimistic. Zhao Qinghe, a senior statistician at the National Bureau of Statistics, highlighted that the production and operation activity expectations index for manufacturing hit 54.7 in November, marking two consecutive months of increase, suggesting an overall enhancement in market confidence among manufacturers.

Several experts interviewed have expressed anticipation that macroeconomic policies will gain further momentum. Wang Qing, chief macro analyst at Dongfang Jincheng, acknowledged that market demand still requires additional stimuli and that the recovery in macroeconomic conditions is currently moderate. "Overall, with the rollout of a series of new proactive policies, coupled with the effects of existing strategies becoming more apparent, the outlook for China’s manufacturing sector appears to be improving, showcasing performance that exceeds seasonal expectations. Nonetheless, the services and construction industries still exhibit relative weakness, and the prevailing low price levels present ongoing challenges," emphasized Wen Bin. He suggested that new proactive measures are likely to emerge in the near future to mitigate external pressures and bolster the foundations of economic recovery.