The latest data released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing for October indicates a positive shift in China's economic landscapeThe Purchasing Managers' Index (PMI) for the manufacturing sector reached 50.1%, while the non-manufacturing business activity index stood at 50.2%. Additionally, the comprehensive PMI output index recorded 50.8%, marking an increase of 0.3, 0.2, and 0.4 percentage points respectively compared to the previous monthNotably, all three indices are above the critical threshold, suggesting a resurgence in economic activity.

According to Zhaoqinghe, a senior statistician at the National Bureau of Statistics’ Service Industry Survey Center, the continued implementation of a package of economic stimulus policies, combined with the gradual effect of previously enacted regulations, has fostered an improvement in the economic climate.

The recent rise in the manufacturing PMI is particularly striking

After spending five consecutive months below the 50% mark, the manufacturing PMI has returned to the expansion zone, signaling an optimistic trend in economic activityWen Tao, an expert at the China Logistics Information Center, noted that historically, October PMIs have often been lower than those of September since 2005. However, this year, October recorded a seal of growth, underscoring the effectiveness of macroeconomic policies that foster stable growth.

According to Zhang Liqun, the rising PMI points to early signs of stabilization in economic operationsIndices reflecting production activity, new orders, procurement volume, factory prices, and production expectations indicate that manufacturing enterprises are showing comprehensive recovery signalsThis process not only reflects a recovering economy but also suggests a renewal of business confidence.

Both supply and demand sides show continued improvement

• Signs of Economic Slowdown in the UK
• Increased Uncertainty in Global Capital Markets
• Surge in U.S. Bond Yields
• Reflections on Stock Valuation
• Is the January Effect in the Stock Market Real?

In October, the production index rose to 52%, representing an increase of 0.8 percentage points from the previous month, which suggests that expansion in manufacturing processes is acceleratingThe new orders index also climbed to a steady 50%, surpassing the necklineSpecifically, industries such as general equipment manufacturing, automotive, and electrical machinery saw production and new orders indices exceed 54%, indicating a rapid release of production and demand.

In terms of pricing, the price index has exhibited significant recovery as wellInfluenced by the recent uptick in prices of certain bulk commodities, the major raw material purchase price index and the factory price index increased to 53.4% and 49.9% respectively, marking rises of 8.3 and 5.9 percentage points from the previous monthThis overall improvement in market prices is encouraging.

When looking at the performance of enterprises by size, large enterprises recorded a PMI of 51.5%, a 0.9 percentage point increase from the last month, indicating a stable yet rising economic environment

Medium-sized enterprises reported a PMI of 49.4%, up 0.2 percentage points, thereby exhibiting continuous signs of improvementConversely, small enterprises experienced a decline, with a PMI of 47.5%, down by 1 percentage point, suggesting some challenges persist in this sector.

Industry analyses indicate that a notable shift occurred within the basic raw materials sector, driven by policy changes aimed at stabilizing the market conditionsIn October, the PMI for the basic raw materials industry rose to 49.3%, which is an increase of 2.7 percentage points from the previous month, serving as a critical support for overall PMI improvementThe emerging sectors reveal stable growth as well; the equipment manufacturing PMI is at 51.3%, with both the production and new order indices maintaining healthy levels around 53%. The high-tech manufacturing PMI also held at 50.1%, reaffirming its position within the expansion zone.

On the side of the non-manufacturing sector, there is evident improvement as well

The non-manufacturing business activity index climbed to 50.2% in October, a modest rise of 0.2 percentage points compared to previous data, while the new orders index surged by 3 percentage points, hitting a new high for the year since April.

According to Cai Jin, the vice president of the China Federation of Logistics and Purchasing, the composite index modifications suggest a persistent expansion in non-manufacturing activities and an enhanced market demandSuch a positive shift in supply and demand is expected to reflect positively on pricing, employment, and business expectations moving forwardVarious indices including input prices, selling prices, and employment have displayed varying degrees of increase, with the business activity expectations index recovering from three consecutive months of decline, reaching above 56%.

Given the improving performance in investment and consumption-linked activities, optimism is beginning to permeate the capital markets as well

Analyst Wu Wei from the China Logistics Information Center emphasizes that with the shifting market dynamics, the non-manufacturing input price index reversed a two-month downtrend in October, rising to 50.6%, reflecting an uptick of more than two percentage pointsWhile the selling price index remains below 50%, it too has ended its two-month slide, now steady at 48.5%. Notably, signs of improved employment opportunities are evident as well; although the employment index stays below the pivotal 50%, it has ended a five-month stretch of decline, climbing by 1.1 percentage points to 45.8%.

Looking ahead for the remainder of the fiscal year, analysts are optimistic that achieving the annual economic growth targets is within reachZhou Maohua, a macroeconomic researcher at Everbright Bank, expressed enthusiasm as the rebound in manufacturing signals a positive start to the fourth quarter

Projections suggest a sustained recovery in manufacturing, with non-manufacturing activity indices potentially experiencing accelerated growth.

However, Economic Chief Wang Bin from China Minsheng Bank cautioned that while industry conditions are improving overall, there is still a need for more effective transmission of existing policy measures to the market, particularly concerning new orders in the manufacturing sector, the overall health of small and medium enterprises, and the construction aspects of real estate.

Zhang Liqun notes that the continuing presence of new order indices for small and medium enterprises remaining beneath the critical threshold indicates prevalent market weaknesses, with over 60% of surveyed enterprises identifying inadequate demand as a significant constraint on their business operationsIt is essential to continue intensifying policies aimed at boosting internal demand, particularly through increased government investment in public projects, which would, in turn, stimulate corporate production investments, improve employment situations, and significantly enhance consumer purchasing power.

Data reflect that the manufacturing activity expectations index for October reached 54%, up two percentage points from last month and representing the highest point in the last four months