MNI INTERVIEW: China RatingDog PMI To Remain Above 50

China’s RatingDog Manufacturing Purchasing Managers Index is expected to stay above the 50-point expansion threshold in November and December, despite easing 0.8 points to 50.6 in October, a senior company executive told MNI, adding that the ongoing structural shift from old industries to new-economy sectors will continue to support the index.

While the official government PMI fell 0.8 pp in October to 49.0, marking a seventh consecutive month in contractionary territory, the privately operated RatingDog PMI – formerly the Caixin PMI – remained above 50 for the third straight month, reflecting its heavier weighting toward export-oriented and new-economy industries, said Yao Yu, the company’s founder.

"This suggests economic pressures are less broad-based and that the economy is undergoing a transition from old to new growth drivers," Yao said, pointing to October’s 7.2% rise in high-tech manufacturing output, outpacing the 4.9% overall industrial growth rate. New orders and production remained in weak expansion, while inventories showed mild restocking, all outperforming the official PMI, he added.

Despite October’s 1.1% y/y drop in exports in USD terms – the weakest since February and below the 5.3% rise over the first 10 months – Yao expects near-term resilience, with some marginal improvement from lower U.S. tariffs and a more stable environment next year. This should ease the elevated trade uncertainty seen in October ahead of the U.S.-China leader meeting in Kuala Lumpur, when new export orders fell sharply, he said.

However, benefits may be limited, as earlier export substitution through non-U.S. partners has already offset part of the tariff burden. China’s strong ties with these partners will continue to provide re-export channels and their own final demand, offering more durable support for outbound shipments, he noted.

INVOLUTION

Government efforts to curb excessive competition – so-called anti-involution measures – may offer some upward support to prices, though impacts will differ across upstream, midstream and downstream sectors, potentially placing modest pressure on production and demand indicators within the PMI, Yao said. 

The comments follow data showing CPI rose 0.2% in October after a 0.1% increase in September, while PPI fell 2.1% y/y, narrowing from September’s 2.3% decline.

Fiscal policy, however, is likely to lend support, Yao argued, citing the recent allocation of CNY500 billion in unused local government bond quota to spur effective investment, as well as signals from the 15th Five-Year Plan proposals pointing to forthcoming demand-boosting measures. (See: MNI: China To Maintain Modest Debt Expansion)