China’s factories are sending a troubling signal: manufacturing unexpectedly stalled in November, hinting at deeper cracks in the world’s second-largest economy. But here’s where it gets interesting — despite government efforts and recent trade diplomacy, domestic demand still isn’t bouncing back as many economists hoped.
A private survey released Monday revealed that China’s manufacturing activity slipped into contraction last month. The RatingDog China General Manufacturing PMI, compiled by S&P Global, dropped to 49.9 in November — below analysts’ forecasts of 50.5 from a Reuters poll. Remember, any reading under 50 means business conditions are shrinking; anything above that indicates growth.
Even the government’s own data echoed the slowdown. The official manufacturing PMI, published Sunday, showed activity shrinking for the eighth straight month at 49.2 — a slight improvement compared with October’s 49.0 but still firmly in the red. The contrast between the two figures has long fascinated economists, as the private index tends to focus on smaller, export-oriented companies that often respond faster to global shifts.
The RatingDog survey, known previously as the Caixin/S&P Global PMI, reflects feedback from around 650 manufacturers gathered in the second half of each month. In comparison, the official PMI canvasses over 3,000 firms at month’s end, covering large state-owned and domestic enterprises. This difference often results in diverging outlooks — one tracking nimble private exporters, the other capturing traditional heavy industry.
Beyond manufacturing, there’s another worrying sign. The official non-manufacturing PMI, which tracks construction and services, slipped to 49.5 — marking its first contraction since December 2022. Analysts say this fall was largely driven by a sagging real estate market and weaker demand in residential services, sectors once considered China’s economic backbone.
Taken together, these numbers offer an early snapshot of how the economy fared in November. They reinforce what many feared: the final quarter of 2025 might prove even tougher than the previous one. Earlier data had already shown a slowdown — fixed-asset investment, which includes real estate, dropped 1.7% in the first ten months, hitting levels not seen since the pandemic year of 2020. The October figure alone plummeted 11.4% year-over-year, the worst since China was battling the early COVID-19 outbreak.
Meanwhile, industrial output managed a 4.9% annual gain in October, but retail sales growth weakened to just 2.9%, continuing a five-month slump. Both figures fell to their lowest levels since August 2024, based on data from LSEG. Add to that another red flag: exports unexpectedly shrank 1.1% in October — the first decline in almost two years — as global demand cooled and earlier export surges lost momentum.
Tommy Xie, head of Asia macro research at OCBC Bank, commented that China’s economic growth is likely to dip below 4.5% in the fourth quarter, slipping from 4.8% in the previous term. He said investors and analysts would be watching closely for signals from the upcoming Politburo meeting and the Central Economic Work Conference to gauge Beijing’s priorities for 2026.
But there’s one silver lining amid the gloom. Tensions with Washington have eased — at least for now — following a temporary trade truce after Donald Trump met Chinese leader Xi Jinping in South Korea in late October. As part of the deal, the U.S. agreed to roll back steep tariffs on Chinese exports in return for Beijing’s cooperation on issues such as fentanyl regulation and rare-earth exports. China also resumed buying American soybeans, while the U.S. suspended port fees on Chinese ships and paused its planned tech restrictions for a year.
Could this fragile détente between the two economic powers give China’s factories the spark they desperately need? Or will weakening domestic demand weigh heavier than any trade relief? Share your thoughts — is this just a short-term dip, or a sign of deeper structural troubles in China’s economy?
