China’s Factory Activity Contracts Unexpectedly in November, Private Survey Shows

China’s factory activity contracted in November, surprising analysts and underscoring persistent weakness in domestic demand, according to a private survey released Monday. The RatingDog China General Manufacturing PMI, compiled by S&P Global, slipped to 49.9, missing expectations of a 50.5 reading in a Reuters poll. The index fell below the 50-point threshold that separates expansion from contraction, down from 50.6 in October and 51.2 in September.

The private gauge, which focuses more on export-oriented manufacturers, showed that new orders nearly stalled despite a notable pickup in new export orders, which grew at their fastest pace in eight months. Survey responses indicated manufacturers reduced staffing, scaled back purchasing and managed inventories more cautiously as domestic demand softened.

The data comes after the official manufacturing PMI, released a day earlier, showed factory activity shrinking for an eighth straight month at 49.2, although slightly improved from October. The official survey covers a broader sample of more than 3,000 companies, compared with 650 in the private survey.

S&P Global and RatingDog said production growth halted in November as weak domestic business weighed on output. Yao Yu, founder of RatingDog, expects only a “weak expansion” in December as policymakers work to meet China’s full-year growth target of “around 5%.”

Non-manufacturing activity also showed signs of strain. The official services and construction PMI fell to 49.5, its first contraction since December 2022, dragged down by continued real estate weakness and soft residential services demand.

The readings come amid a broader economic downturn. Fixed-asset investment declined 1.7% in the first 10 months of the year, the sharpest drop since 2020, while October alone saw an 11.4% fall. Property investment continued its prolonged slump, industrial output growth slowed and retail sales expanded at their weakest pace since mid-2024. Exports unexpectedly contracted in October for the first time in nearly two years.

Economists say growth is likely to slow to below 4.5% in the fourth quarter, down from 4.8% in Q3. While U.S.–China tensions have eased following a recent trade truce, analysts caution that domestic demand remains fragile and deflation risks may persist into next year.