China’s Factory Activity Stalls: Private Gauge Unexpectedly Slumps Below Growth Threshold in November

China’s factory sector unexpectedly slipped back into contraction in November, underscoring ongoing weakness in domestic demand and raising fresh concerns about the momentum of the world’s second-largest economy. The RatingDog China General Manufacturing PMI—a private gauge compiled by S&P Global—came in at 49.9, below the 50 threshold that separates expansion from contraction and under market expectations of 50.5 in a Reuters survey. The reading was softer than October’s 50.6 and September’s 51.2, breaking a three-month stretch of growth. The decline also mirrored the official manufacturing PMI, which posted 49.2, marking its eighth straight contraction. According to the survey, which covers 650 firms, many of which rely heavily on overseas orders, production growth stalled as new orders barely increased.

One area of improvement appeared in foreign demand, with export orders recording their fastest rise in eight months. Even so, RatingDog founder Yao Yu said the slow pace of new business led companies to scale back hiring and purchases, with manufacturers managing inventories more conservatively. The report adds to a steady stream of data indicating the economy is struggling to regain traction at the end of the year, weighed down by weak consumer spending and prolonged stress in the property sector.

Signs of pressure were also evident outside manufacturing. The official non-manufacturing PMI—which covers services and construction—dipped to 49.5 in November, its first contraction since late 2022, largely reflecting continued difficulties in real estate. Investment figures reinforced the picture of a broader loss of momentum: Fixed-Asset Investment declined 1.7% during the first ten months of the year, a drop not seen since 2020. For October alone, FAI fell 11.4% from a year earlier, the weakest result since the same period. Property Investment also deteriorated, sliding 14.7% over the January–October period, deeper than the 13.9% decline seen through the first three quarters.

Other indicators pointed in the same direction. Industrial production expanded 4.9% in October, while retail sales slowed for the fifth straight month to 2.9%, both marking their lowest growth since August 2024. Exports also unexpectedly turned negative, slipping 1.1% year-on-year—the first decline in nearly two years. Economists warn that the accumulation of soft data suggests GDP growth is likely to fall below 4.5% in the fourth quarter, compared with 4.8% in the previous quarter.

Looking ahead, Yao Yu expects only a modest pickup in factory activity in December and anticipates that policymakers will step up efforts to keep annual growth near the “around 5%” target. Geopolitical tensions have eased somewhat after the U.S. and China reached a trade truce in late October, which included Washington reducing certain tariffs on Chinese goods. Analysts note, however, that while this agreement reduces immediate uncertainty, it does little to resolve sluggish domestic demand, and deflationary pressures are likely to persist into next year.

In financial markets, mainland China’s CSI 300 index edged up 0.36%, while Hong Kong’s Hang Seng Index rose 0.74% on Monday.