China's Manufacturing Activity Expands in October

BEIJING (Reuters) – China's manufacturing activity in October expanded for the first time in six months, according to an official factory survey released on Thursday. This development supports policymakers' optimism that recent stimulus measures will help to stabilize the world's No. 2 economy.

The official purchasing managers' index (PMI) increased to 50.1 in October from 49.8 in September, surpassing the 50-mark that separates growth from contraction. This also exceeded the median forecast of 49.9 in a Reuters poll.

In a further positive sign, the non-manufacturing PMI, which includes construction and services, rose to 50.2 this month, up from 50.0 in September.

Policymakers are banking on additional financial stimulus announced in late September to stabilize China's $19 trillion economy and revitalize lending and investment, which have been stifled by a sharp downturn in the property market and weak consumer confidence.

The manufacturing sector has seen depressed conditions for months, affected by plummeting producer prices and declining orders. Additionally, China's exports, previously a bright spot, diminished last month, and the economy recorded its slowest growth since early 2023 in the third quarter.

Despite these challenges, officials remain optimistic that the recent policy measures will soon have a positive impact.

Economists have noted that sentiment-based surveys often reflect a more pessimistic view compared to hard data indicators. In the poll, one-in-three respondents predicted that factory activity returned to expansion this month.

However, a concerning development is that industrial profits recorded their steepest monthly decline of the year in September, attributed to insufficient demand, according to data released on Sunday by the National Bureau of Statistics.

Recent indicators have also pointed to increased deflationary pressures and subdued loan demand, raising concerns about the economic recovery and emphasizing the necessity for further stimulus to boost growth.

China is reportedly considering the approval of over 10 trillion yuan ($1.4 trillion) in additional debt issuance over the next few years, as reported by Reuters on Tuesday.

> ($1 = 7.1301 Chinese yuan)