China’s Manufacturing PMI remained in contraction in September, according to data released by China’s National Bureau of Statistics on September 30.

China Manufacturing PMI was 49.8% in September, showing a slight improvement of 0.7% from the previous month but still below the 50-point mark, indicating a continued contraction in the manufacturing sector. Among the sub-indices, only the production index returned to expansion, while other key indicators remained in contraction, reflecting the ongoing weakness in China’s manufacturing industry.

In the non-manufacturing sector, the Business Activity Index slightly declined from 50.3 in the previous month to 50 in September, halting a two-month rise. By industry, the construction business activity index was stable at 50.7, while the services business activity index fell from 50.2 to 49.9, marking its first contraction this year. All major sub-indices declined in September, pointing to persistently weak consumer demand even after a brief summer stimulus.

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Caixin PMI Also Shows a Slowdown…

Similarly, the Caixin PMI, which focuses more on small and medium-sized enterprises, showed a downturn in both manufacturing and services in September.

The Caixin Manufacturing PMI fell from 50.4 in August to 49.3. The production index remained in expansion but at a slower pace, while the new orders index dropped into contraction, reaching its lowest level since October 2022. The employment index remained in contraction, reflecting continued layoffs as a result of weak new orders. Although import prices decreased due to lower metal costs, weak demand further suppressed output prices.

In the services sector, the Caixin Services Business Activity Index declined from 51.6 in August to 50.3, staying barely in expansion but reaching its lowest point since October 2023. The new business index fell, only slightly above the contraction threshold, while stable external demand kept the export index in expansion. The employment index improved slightly into expansion, driven by new business, though the overall expansion remained weak. Input prices rose due to higher material and labor costs, but weak domestic demand and increased competition put downward pressure on selling prices.

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Overall, continued weakness in domestic demand has led to declining new orders and business across both manufacturing and services, with manufacturing particularly affected. As business activity declines, companies are facing greater pressure to cut labor costs, further suppressing consumer spending. Rising material costs combined with falling product prices are also eroding business confidence in future prospects. Although the Chinese government has implemented substantial monetary easing measures and promised more support if needed, some economists believe that fiscal policies will also be necessary to address domestic demand shortfalls, as recent stimulus measures have had only short-term effects.