China factory activity improves but slump extends to six months

The non-manufacturing measure of activity in construction and services fell more than forecast to 50 from 50.3 last month, the statistics office said. A reading below 50 indicates contraction

China’s factory activity improved slightly but extended its decline into a sixth month — the longest slump since 2019 — with the economy at risk of a slowdown after a growth spurt to start the year.

The official manufacturing purchasing managers’ index was 49.8, versus 49.4 in August, the National Bureau of Statistics said Tuesday. The median estimate of economists surveyed by Bloomberg was 49.6.

The non-manufacturing measure of activity in construction and services fell more than forecast to 50 from 50.3 last month, the statistics office said. A reading below 50 indicates contraction.

It’s the first evidence that weakness in the economy persisted through the end of the third quarter after its two worst months this year in July and August. Hurting the outlook for Chinese factories is subdued domestic demand, while uncertainty around US tariffs creates risks for exporters.

Both the production and the new order indexes rose from the previous month, showing improved market demand, according to Huo Lihui, chief statistician at the NBS. But due to the end of the summer holiday period, business activity indicators related to travel — such as catering, culture, sports and entertainment — contracted in September.

A boom in exports is cooling off after companies rushed to ship products to get ahead of US President Donald Trump’s tariffs. Many analysts and investors expect a slowdown in China’s economy during the final months of 2025 after it clocked growth of 5.3% in the first half.

“All told, the PMI data suggests we may see some marginal improvement in September after the weakness over the summer,” said Michelle Lam, Greater China economist at Societe Generale SA. “But the growth outlook will remain challenging as the tariff impact becomes more visible and the effect of consumption subsidies eases.”

Private survey results were more upbeat, according to separate reports released on Tuesday. The RatingDog China General Manufacturing PMI unexpectedly rose to 51.2 in September from 50.5 in the previous month, with new export orders returning to growth for the first time since March 2025.

The RatingDog services PMI also improved and reached 52.9 last month from 53 in August.

The private poll results have tended to be stronger than those from the official poll over the previous year as exports stayed resilient. The two surveys cover different sample sizes, locations and business types, with the private poll focusing on small and export-oriented firms.

“Although new export orders rose only modestly, it was still a relatively positive signal, alleviating some market concerns over the recent weakness in exports,” said Yao Yu, founder at RatingDog.

A key question now is if the government will step in and add stimulus to support growth, especially as the ruling Communist Party prepares to convene a closed-door meeting in October to review development plans for the next five years.

On Monday, China announced it’s offering 500 billion yuan ($70 billion) worth of capital to spur investment, in a long-anticipated move to boost growth under the so-called “new financing policy tool.”

Another constraint on the economy is a real estate market still in distress after a crisis started in 2021. China’s home sales extended their slump in August even as the country’s two biggest cities rolled out additional stimulus measures.

“The property market shows no sign of recovery,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “This is different from the situation of 2019-2020. The market expectation has changed. And the slowdown is more structural than cyclical.”

Although US-China relations appear to have stabilized following a telephone call between their two leaders, a 90-day tariff truce between the nations is set to expire in early November. Trump said he will be meeting Chinese President Xi Jinping on the sidelines of the upcoming Asia-Pacific Economic Cooperation summit in South Korea.

The government’s campaign that aims to ease overcapacity and excessive competition among companies is also putting pressure on the economy. The effort escalated in early July and may have contributed to a fall in output for products like steel.

Cost pressures heated up among manufacturers last month, according to the RatingDog survey, which also found that companies chose to lower their selling prices during what it called “intense competition.”