China's factory activity contracts as export orders decline

China's factory activity contracted in October, according to data from the National Bureau of Statistics, as new export orders weakened. The official manufacturing purchasing managers’ index (PMI) fell to 49.3, down from 50.1 in September and 49.8 in August.

The PMI, which measures economic activity on a scale from 0 to 100, indicates contraction when readings fall below 50. Several subindexes, including new export orders, also showed contraction, with the latter dropping to 48.7 from 50.0 in September.

Chinese companies have increased exports to overseas markets to offset declining domestic demand, which has been affected by the prolonged downturn in the property sector. However, many trading partners have raised concerns about the growing trade imbalance with China.

The European Union has pointed to an unsustainable trade deficit with China, which reached $1.1 billion per day in 2025. In response, the EU has taken steps to rebalance trade, including agreements to limit the import of Chinese hybrid vehicles.

China has been exporting more to Europe, Southeast Asia, and Latin America since the U.S. imposed higher tariffs last year. During a visit to China, Germany’s President Frank-Walter Steinmeier met with Chinese leaders, including President Xi Jinping and Premier Li Qiang.

Li Qiang told Steinmeier that China is open to importing more high-quality German products. Some economists predict that China’s exports will remain strong for the rest of the year, with its overall trade surplus in 2026 possibly exceeding last year’s record of $1.2 trillion.