The reading followed official surveys released Thursday showing factory activity ended five months of contraction last month, adding to evidence that a stimulus package unveiled in late September has lifted sentiment. The pace of growth exceeded expectations by all 12 analysts surveyed by Bloomberg.
The benchmark CSI 300 Index of onshore Chinese stocks rose 0.55%. The offshore yuan weakened 0.1% against the dollar and China’s 10-year government bond yield was steady at 2.14%.
The survey shows that “market demand stabilized and optimism improved, suggesting early signs of policy impact,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the release. The uptick in activity defied the drag from fewer working days in October as a result of the Golden Week holiday.
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In another sign of improved confidence, China’s residential property sales rose in October, the first year-on-year increase of 2024.
But the Caixin data also gave reason for caution, with manufacturers reporting job cuts for a second straight month. The employment subindex fell to its lowest level since May last year, with widespread declines in staffing among companies producing capital goods such as equipment and tools.
And while exports have been a relative bright spot in the Chinese economy, new export orders shrank for the third consecutive month, according to the survey, reflecting slowing global demand.
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Chinese exports have powered the economy this year with shipments in the first three quarters soaring to the second-highest value on record, but the pace of growth slowed sharply in September.
What Bloomberg Economics says...
The official and Caixin data were among the first to provide a snapshot of the economy after China made forceful cuts to interest rates and unveiled measures to bolster the housing market. The efforts signalled Beijing’s intent to reach the growth target of around 5% this year and prompted a stock rally. Investors now expect further fiscal support to be announced at a legislative meeting next week.
The Caixin results continued to be stronger than those from an official poll since last year. The two surveys cover different sample sizes, locations and business types with the private poll focusing on small and export-oriented firms. The Caixin reading trailed the official figure only once in the last 12 months.
Despite the green shoots in manufacturing, Chinese factories are facing rising new business uncertainty ahead as regions like the EU move forward with tariffs on electric vehicles from China and an upcoming US presidential vote could reelect Donald Trump, who has threatened to impose 60% tariffs on Chinese products.
