China’s factory activity shrinks again in November, services activity cools

China’s factory activity shrank for an eighth month in November while services activity cooled, highlighting the dilemma facing policymakers over whether to press ahead with tough structural reforms or roll out more stimulus to lift domestic demand.

The manufacturing purchasing managers’ index (PMI) rose to 49.2 in November from 49.0 in October, the National Bureau of Statistics’ survey showed on Sunday, remaining below the 50-point mark separating growth from contraction. It was in line with analysts’ forecast of 49.2 in a Reuters poll.

Sub-indexes of new orders and new export orders both improved from October, but were still below 50.The data reflects manufacturers’ difficulty in sustaining a post-COVID recovery, compounded by a trade war with the U.S. that has ramped up pressure on businesses.

The non-manufacturing PMI, which includes services and construction, fell to 49.5 from 50.1 in October, shrinking for the first time since December 2022.

Services PMI, in particular, fell below 50 for the first time since September 2024 and marked the lowest since December 2023, as the boost from October’s holiday waned in November, according to the NBS.For decades, China’s policymakers have had two reliable levers to juice growth: revving up its huge industrial machine to boost exports when household spending softened, or unleashing state-funded infrastructure projects to drive momentum.But with a global slowdown, a protracted property crisis and local governments straining under their debts, officials are finding it hard to jump-start activity, putting renewed focus on the need for economic reforms.

Growth in the world’s second-largest economy slumped to its weakest pace in a year in the third quarter, underscoring its vulnerability to the impact of slower external demand.

Policymakers acknowledge the need for reforms to correct long-standing supply-demand imbalances, lift household spending and address the heavy local government debt that prevents many provinces – some with economies the size of countries – from standing on their own.

Even so, they recognise that such structural changes will be painful and carry political risks at a time when U.S. President Donald Trump’s trade war is piling additional pressure on the economy.

China unveiled a new plan to boost consumption on Wednesday, homing in on upgrades of consumer goods in rural areas and sectors such as “pet, anime and trendy toys.”

Analysts polled by Reuters forecast the private-sector RatingDog PMI to come in at 50.5, down slightly from 50.6 a month prior.