China’s manufacturing activity contracted in September for the sixth month in a row amid weak domestic demand and uncertainty over international trade, said an official survey of purchasing managers.
But a private sector survey offered a more upbeat assessment, with export-oriented businesses expanding their inventories and shedding fewer jobs as confidence improved.
The purchasing managers index (PMI) published by the National Bureau of Statistics (NBS) rose to 49.8 in September compared to 49.4 in August. But the survey, which focuses on larger companies mainly orientated towards China’s domestic market, remained below the 50 mark which differentiates expansion from contraction.
The RatingDog General PMI, a private sector survey compiled by S&P Global with more export-oriented private companies, was at 51.2 in September compared to 50.5 in August. This was the fastest expansion in factory activity in six months and the second successive month when the survey was in positive territory.
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“On the demand side, new orders performed well, while new export orders returned to growth for the first time since March 2025,” said RatingDog founder Yao Yu.
“Although new export orders rose only modestly, it was still a relatively positive signal, alleviating some market concerns over the recent weakness in exports. Meanwhile, output continued to expand, and purchasing activity saw the largest increase of the year. Overall business confidence also strengthened again in September.”
Cut-throat competition in China’s domestic market, where demand has been sluggish for a number of years, has pushed prices and profit margins downwards in a phenomenon the authorities in Beijing call involution. Yao said that measures to counteract the trend have helped to increase input prices but output prices fell slightly in September as manufacturers absorbed the extra costs.
The official NBS non-manufacturing PMI fell to 50 in September from 50.3 the previous month but the composite PMI of manufacturing and non-manufacturing rose slightly to 50.6 from 50.5. New export orders contracted for the seventeenth successive month despite a strong overall export performance.
Xi Jinping and Donald Trump spoke by phone on September 19th and the two leaders will meet at a summit in Korea at the end of October. The two sides are finalising details of an agreement on the future of TikTok in the US but other trade issues, including mutual export controls remain unresolved.
China’s exports to other countries, including India, have increased in recent months but none can match the market for Chinese manufactured goods in the US, which accounted for 14 per cent of Beijing’s exports last year. Uncertainty over Trump’s tariffs and future trade conditions is weighing on a Chinese economy already suffering from the impact of a prolonged housing market slump and a weak recovery after the coronavirus pandemic.
