China's factory activity marks third contraction in four months

China's factory activity unexpectedly contracted for the third consecutive month in October, according to a government survey released on Saturday (Oct 31). The official manufacturing purchasing managers index (PMI) fell to 49.3 from 50.1 in September, missing a forecast of 50.0. This decline was attributed to soft demand for exports and domestic goods.

Overseas Christmas-related orders, which were strong in September, cooled in October, while consumer spending, which increased during the first week of China's National Day holiday, waned after returning to its long-stagnant state. Analysts warn that insufficient demand is putting downward pressure on the economy, urging policymakers to act swiftly.

Both sub-indexes for new orders and export orders remained in contraction territory, as did production and purchasing activity. The non-manufacturing PMI also dropped, indicating a slowdown in service and construction sectors. However, some manufacturing sub-indexes remained robust, with production and new orders for industries like railway, shipbuilding, aerospace equipment, and computer, communications, and electronics manufacturing at or above 53.0.

AI-related firms, such as Zhongji Innolight, reported strong earnings growth. Despite the slowdown, analysts expect China's economy to meet its 4.5-5.0 percent annual growth target, as third-quarter growth rebounded to 4.5 percent from 4.3 percent in April-June.