China’s manufacturing activity resumed expanding in September, rising to 50.1 from 49.8 in August. While this growth showed a mild recovery, the country’s economy may still fall short of its 2026 target. Beijing now needs to use market pragmatism to help weak domestic consumption and fix its property market slump.
Summary
The country's main engine of growth, manufacturing, managed to expand by a whisker this month. But its economy may fall short of its 2026 growth target by more than a whisker. It may be time for Beijing to recall Deng Xiaoping's market pragmatism.
China's manufacturing activity resumed expanding in September after two months of contraction, but this mild recovery still paints an unimpressive picture of the country's once-booming economy.
The purchasing managers' index (PMI) for the sector went into expansion by a mere whisker, rising to 50.1 from 49.8 in August. A reading below 50 means a contraction.
That the main engine of what's widely called the world's factory is barely growing underscores the economy's troubles. Domestic consumption has been weak amid a property market slump that has trapped household wealth.
While Beijing's stimulus measures announced this week (including mortgage subsidies for home buyers) could help, it's unclear what a revival would take. No doubt, China's exports have defied trade flux and risen; it even got itself a few concessions from the US after the two countries' leaders met.
Yet, it's obvious that China will need to rely on its own market for an economic rebound. Right now, even a modest 4.5-5% growth target risks being missed by more than a whisker. Underserved consumers, though, hint of potential in a place where the colour of cats isn't supposed to matter if they get the job done.