By Sohaib Shams
China's factory activity contracted in October, reversing a brief rebound in September, as new export orders weakened amid growing trade tensions with major partners.
PMI Signals Contraction
The official manufacturing purchasing managers' index dropped to 49.3 in October from 50.1 in September and 49.8 in August, according to data released Saturday by the National Bureau of Statistics. Readings below 50 indicate contraction, while those above 50 signal expansion.
Export Orders Weaken
Several key subindexes also fell into contraction territory. The new export orders index slipped to 48.7 from 50.0 in September, and the production subindex declined to 49.8 from 51.7. Chinese manufacturers have been shipping more goods abroad to offset weak domestic demand, which continues to be dragged down by a prolonged property sector downturn.
Trade Tensions Rise
An increasing number of trading partners are complaining about growing trade deficits with China. The European Union highlighted what it calls an unsustainable deficit that reached $1.1 billion a day in 2025 and has moved to cap imports of Chinese hybrid vehicles. Since the United States imposed higher tariffs last year, China has redirected exports toward Europe, Southeast Asia, and Latin America.
German President's Visit
During a visit to Beijing, German President Frank-Walter Steinmeier said it is understandable that China wants to protect its economy but warned against making other countries increasingly dependent on it. Steinmeier met with Chinese President Xi Jinping and Premier Li Qiang, who said China is willing to import more high-quality products from Germany.
Outlook and Upcoming Meetings
Economists forecast that China's exports will remain robust for the rest of the year, with the 2026 trade surplus potentially surpassing last year's record $1.2 trillion. Trade is also expected to feature in a meeting between U.S. President Donald Trump and Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation summit in Shenzhen in mid-November.
