China’s manufacturing sector, long considered the engine of the world’s second-largest economy, is facing its most persistent downturn in nearly a decade. Official data released Friday by the Chinese National Bureau of Statistics revealed that factory activity contracted for the seventh consecutive month in October 2025, casting a shadow over hopes for a robust economic rebound in the final quarter of the year.
The closely watched manufacturing Purchasing Managers’ Index (PMI) dropped to 49.0 in October, down from 49.8 in September, according to reporting by the National Bureau of Statistics and highlighted by Bloomberg News and MT Newswires. A PMI reading below 50 signals contraction, and the latest figure not only missed economists’ forecasts of 49.6 but also tied with April for the lowest level this year. It’s a disappointing milestone that underscores the sector’s ongoing struggles amid global trade turbulence and shifting domestic priorities.
“Manufacturing in October slowed due to factors such as... the more complex international environment,” explained Huo Lihui, chief statistician at the Bureau of Statistics, in a statement reported by New Age BD. Huo also pointed to China’s week-long Golden Week national holiday in early October, which typically dampens factory output, as a contributing factor. Still, many analysts noted that the holiday effect was well anticipated and factored into official projections, making the depth of the decline all the more concerning.
Drilling deeper into the PMI data, the weakness was broad-based. The production subindex fell to 49.7, its lowest point since May 2023, while new orders dropped to 48.8—the weakest since August 2024, according to ING. Particularly troubling was the decline in new export orders, which slipped to 45.9, marking a six-month low. This signals that China’s factories are not only facing weaker domestic demand but also struggling to find buyers overseas.
Indeed, China’s export landscape has shifted dramatically over the past year. While manufacturers once enjoyed a pre-tariff surge in shipments to the United States, that momentum quickly fizzled as new tariffs took effect. Exports to the U.S. have now fallen by double digits for six straight months, according to Bloomberg News. In response, Chinese exporters have sought to diversify, ramping up shipments to Southeast Asia and Africa. Still, the U.S. market remains a critical outlet, and the loss of demand has left many factories in limbo.
October brought a glimmer of hope on the trade front. After a high-stakes meeting in South Korea on October 30, U.S. President Donald Trump announced a partial truce in the ongoing trade war with China. The U.S. agreed to halve a 20 percent tariff on certain Chinese goods, reducing overall tariffs from 57 percent to 47 percent. President Xi Jinping, in turn, promised to suspend some export restrictions on rare-earth minerals and resume purchases of U.S. soybeans. HSBC economist Taylor Wang commented, “A U.S. tariff cut means Chinese exports will be able to regain more competitiveness in the U.S. market and we could see some recovery of direct exports to the U.S. soon.”
Yet, as Wei Li, head of multi-asset investments at BNP Paribas Securities (China), cautioned, “Despite tariff truce progress, global uncertainty continues affecting manufacturing sentiment. U.S.-China agreements will likely prevent further deterioration rather than drive a robust recovery.” The mood among Chinese exporters reflects this cautious optimism—while some expect a modest pickup in orders, the unpredictable nature of U.S. trade policy has left many wary of counting on a sustained rebound.
Compounding the export woes are deeper structural challenges at home. China is grappling with a prolonged slump in its property market, which has sapped consumer confidence and slowed investment in construction and real estate. The New York Times recently observed that “the challenges at home include youth unemployment, a threadbare social welfare system, and an aging population. But the government has failed to take on these problems aggressively, instead tinkering with incremental policy changes and doubling down on investing in the factories that generate goods for export.”
Despite Beijing’s efforts to shift the economy away from heavy reliance on manufacturing and toward greater consumer spending, the transition has been slow and fraught with setbacks. New factory orders in October were the lowest since 2023, and the current factory slump is China’s longest in over nine years. The employment subindex has remained in contraction for a staggering 32 consecutive months, with all sizes of enterprises—large, medium, and small—sliding into negative territory in October for the first time since April.
Analysts are increasingly worried that the final three months of 2025 may see the slowest economic performance since the zero-Covid lockdowns of 2022. Zhaopeng Xing, a senior strategist at Australia & New Zealand Banking Group, told Bloomberg News, “The latest result from the Trump-Xi summit may provide some positives going forward. But policy support will be necessary to stop the deteriorating momentum.” So far, however, Beijing has been reluctant to roll out large-scale stimulus, opting instead for incremental tweaks and targeted interventions.
There were, however, a few faint bright spots in the October data. China’s composite PMI, which includes both manufacturing and services, edged down to 50 from 50.6, just barely remaining in positive territory. The non-manufacturing PMI, which covers sectors like services and construction, ticked up slightly to 50.1, marking a return to expansion after hovering at the threshold in September. Business expectations in the non-manufacturing sector also improved, rising to 56.1, suggesting that some companies remain hopeful about the future.
Economist Zhiwei Zhang of Pinpoint Asset Management offered a measured outlook, writing, “The economic momentum has weakened since the middle of the year, but after negotiations with the United States went successfully... I think the macro policy in China will stay unchanged for the rest of this year.” Still, with new orders and production both falling, and global demand uncertain, the path to recovery looks challenging.
As China enters the final stretch of 2025, all eyes are on whether the recent trade truce and any further policy measures can help stabilize the manufacturing sector. For now, the data paints a picture of an economy in transition—still heavily reliant on exports, but struggling to adapt to a new global reality and a changing domestic landscape.
China’s policymakers face a delicate balancing act: stimulating growth without fueling excess capacity or financial risk, all while managing the expectations of workers, businesses, and global investors. The coming months will be critical in determining whether the world’s factory floor can regain its footing—or if further contraction lies ahead.
