China’s factory activity shrank in October, according to official figures released on Saturday, in a fresh sign that the world’s second-largest economy is struggling with weak demand at home and softer orders from abroad. The setback matters well beyond China, because Chinese factories supply goods to almost every country, including Pakistan.
The official manufacturing purchasing managers’ index, or PMI, fell to 49.3 in October from 50.1 in September. The PMI is a monthly survey of factory managers: a reading above 50 means activity is expanding, while a reading below 50 means it is contracting, or shrinking. October was the third contraction in four months, and the result was weaker than the 50.0 reading forecast in a Reuters poll of economists.
Where the weakness showed up
The details were soft across the board. Production slipped into contraction at 49.8, down from 51.7 in September, and new orders fell to 49.4 from 50.5. New export orders also stayed in contraction territory, a sign that foreign buyers ordered less. Services and construction weakened too: the non-manufacturing PMI fell to 49.7 from 50.2, and the combined composite index dropped to 49.7 from 50.7.
Not every part of industry struggled. High-technology manufacturing stayed in expansion at 51.3, and equipment manufacturing stood at 50.6. Large manufacturers also remained just above the dividing line at 50.2, while medium-sized firms fell to 48.4 and small firms to 47.5. In other words, the biggest and most advanced firms held up better than smaller ones.
Officials pointed to seasonal reasons, including demand brought forward before China’s National Day holiday and a complex international environment. A separate private survey told a brighter story, with its manufacturing PMI at 52.0 in October, only slightly down from 52.1 in September. The two surveys cover different groups of firms, so a gap between them is not unusual — but the official survey is the one most closely watched for the overall direction.
What it means for Pakistan
China is one of Pakistan’s most important trading partners, and a slower Chinese economy cuts both ways. On one hand, weaker Chinese demand can soften world prices for some raw materials and industrial goods, which may ease import costs. On the other, it can mean fewer export orders and less appetite for goods from countries that sell into Chinese supply chains.
Pakistan should also watch the policy response. China’s economy still grew 4.5 percent in the third quarter, up from 4.3 percent in the second quarter, and it is expected to meet its annual growth target of 4.5 to 5.0 percent without extra stimulus. If growth slows further, Beijing may act to support demand — and that would be good news for its trading partners. For now, October’s figures are a reminder, not a crisis: China is growing, but its factories are not firing on all cylinders.
Sources: Reuters, Bloomberg. Written in our own words for information only — not investment advice.