Chinese manufacturing grows more than expected, but downside risks remain

(Sharecast News) - China's manufacturing sector grew at its fastest rate in five months in November, according to data from Caixin and S&P Global. The manufacturing PMI rose to 51.5, up from 50.3 in October and ahead of the 50.5 consensus forecast,

This was the second straight month of expansion and the strong expansion since June, helped by higher new work inflows, which rose at their fastest rate since February 2023.

External demand also bounced back, which Caixin said was due partly to some overseas clients increasing purchases after the US election, with the foreign orders indicator growing for the first time in four months.

Purchasing activity and inventory levels also rose as confidence about the year ahead grew to its highest level since March.

However, manufacturing firms still remained cautious about hiring with headcounts falling for the third straight month due to resignations and redundancies.

"Business optimism improved. Surveyed companies expressed confidence in the effects of recent stimulus policies and the economic recovery in the near term. The gauge for future output expectations rose significantly, approaching its historical average," said Wang Zhe, senior economist at Caixin Insight Group.

However, despite recent additional stimulus measures announced by the government, the economy still faces "prominent" downward pressure, Zhe said, marked by the continued contraction in employment.

"While the economic downturn appears to be bottoming out, it needs further consolidation. The consistency and effectiveness of those additional stimulus measures deserves close attention. The structural and cyclical pressures facing the economy are expected to continue, coupled with the likelihood of continued accumulation of external uncertainties, which requires sufficient policy buffers," Zhe said.