BEIJING (Reuters) -China’s factory activity in October expanded at a slower pace as new orders and output both waned amid tariff anxiety, a private-sector survey showed on Monday.
The RatingDog China General Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 50.6 in October from 51.2 in September, missing analysts’ expectations of 50.9 in a Reuters poll. The 50-mark separates growth from contraction.
“Among the sub-indices, only employment showed a positive month-on-month change, while all other indicators declined to varying degrees,” said Yao Yu, founder of RatingDog.
The survey was taken when U.S. President Donald Trump had threatened to impose 100% tariffs on Chinese goods.
However, he has since agreed with China’s President Xi Jinping on Thursday to trim 10% tariffs on Chinese goods in exchange for Beijing cracking down on the illicit fentanyl trade, resuming U.S. soybean purchases and keeping rare earths exports flowing.
Analysts expected the trade truce to create a smaller impact on China’s exports and growth.
Monday’s reading was better than that of an official survey released on Friday, which showed the factory activity decline deepened.
Rising new orders led to higher production, though both eased from September.
To cope with higher production requirements, factory bosses said they had hired additional staff, sending the job creation pace to the fastest since August 2023 and marking the first rise in headcount in seven months.
Small importers for large U.S. retailers rushed in Chinese-made strollers and wares meant for spring and are storing the goods in their own warehouses, Reuters reported.
The upcoming shopping season also led to purchasing activity expanding for a fourth straight month in October.
However, the survey showed new export orders fell, reversing September’s rise, with anecdotal evidence suggesting that overseas demand was affected by increased global trade uncertainty. The rate of contraction was the sharpest in five months.
Producers also reduced their export charges for the first time since April.
When assessing the one-year outlook for production, firms were the least upbeat in six months.
On the price side, the divergence of rising raw material prices and falling finished goods prices remains, keeping corporate profit margins under pressure.
Citi analysts said October witnessed an 8-day holiday disruption, renewed tariff uncertainty and weakening growth momentum. They didn’t expect major policy stimulus within the year, but said the deployment of incremental support is stepping up.
To rev up activity, the government has allocated 500 billion yuan ($70.20 billion) of financial tools through policy banks to support investment and another 500 billion yuan to replenish local finances.
($1 = 7.1230 Chinese yuan)
(Reporting by Ellen Zhang and Ryan Woo; Editing by Sam Holmes)
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