BEIJING (Reuters) -China’s factory sector likely shrank for an eighth month in November, highlighting the dilemma facing policymakers over whether to press ahead with tough structural reforms or roll out further stimulus amid faltering domestic and external demand.
A Reuters poll of 21 economists forecast the official purchasing managers’ index (PMI) would rise to 49.2 from October’s 49.0, remaining below the 50-point threshold that separates growth from contraction. The data is due on Sunday.
The persistent weakness reflects manufacturers’ difficulty in sustaining a post-COVID recovery, compounded by a costly trade war with the U.S. that has forced factory owners to move away from the world’s top consumer market.
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 running out of ways to jump-start activity, putting renewed focus on the need for economic reforms.
Separate industrial profits data from Thursday came in weaker than expected, weighed down by a high base effect from last year, when officials opted for additional stimulus to boost growth.
The world’s second-largest economy, however, remains vulnerable to the impact of slower external demand with growth in the third quarter hitting its weakest pace in a year.
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 from 50.6 a month prior.
(Reporting by Joe Cash; Polling by Devayani Sathyan in Bengaluru and Jing Wang in ShanghaiEditing by Shri Navaratnam)
