China’s Manufacturing PMI Slips Back Below 50, Putting Yuan and Risk Appetite Under Pressure
China’s private manufacturing gauge dipped back into contraction in November, underscoring fragile domestic demand and raising caution for FX and commodities traders keyed to Chinese growth momentum.
Factory Pulse Weakens as Domestic Orders Fade
The RatingDog China General Manufacturing PMI, compiled by S&P Global, eased to 49.9 in November from 50.6 in October, slipping under the 50 mark that separates expansion from contraction and missing consensus. The reading tracked with official PMI figures showing the sector shrinking for an eighth straight month, suggesting the post-holiday boost has faded.
Output stalled as new orders softened, highlighting a renewed drag from domestic demand. Export orders, however, improved at the fastest clip in eight months following October’s U.S.–China trade thaw, though the external lift wasn’t enough to counter homegrown weakness. Amid heavy competition, export prices edged lower.
What the Survey Signals for Markets
Evidence of strain re-emerged across factory floors: firms shed jobs, purchasing activity contracted for the first time since June, and inventories of inputs and finished goods were run down at the quickest pace in nearly a year as producers avoided carrying excess stock. Input costs rose on higher metal prices, but businesses resisted passing them through, opting for further discounts that pushed output charges lower—an uncomfortable mix of margin pressure and disinflation at the factory gate.
Market Lens: FX, Stocks, and Commodities
- FX: Softer PMIs typically weigh on the yuan (USD/CNH) and can pressure China-sensitive currencies such as the AUD and KRW, especially if risk appetite falters. Persistent factory disinflation may also reinforce modest easing biases at the PBOC, anchoring rate differentials and keeping the yuan’s topside contained.
- Equities: Asian stocks often trade defensively on weaker Chinese activity data, with cyclicals and industrials underperforming. Thin year-end liquidity can amplify moves.
- Commodities: Higher input costs linked to metals point to firm underlying commodity pricing, but the demand side is softer. That mix can cap rallies in copper and iron ore if forward orders remain tepid.
The PMI miss keeps pressure on policymakers to sustain targeted support. Traders will watch PBOC liquidity operations, potential reserve requirement or relending tweaks, and fiscal follow-through on infrastructure to stabilize manufacturing and employment.
Key Points
- PMI: RatingDog China General Manufacturing PMI fell to 49.9 in November (Oct: 50.6).
- Alignment with official data: Official gauges show manufacturing in contraction for an eighth month.
- Output and orders: Production stalled; domestic new orders softened.
- External demand: Export orders rose at the fastest pace in eight months; export prices slipped slightly.
- Margins and prices: Input costs rose on higher metals, while output prices declined due to discounting.
- Capacity and inventories: Job shedding resumed; purchasing activity contracted; inputs and finished goods inventories fell sharply.
- Macro tone: Weak domestic momentum offsets export improvement, raising FX and commodity volatility risks.
What’s Next for Traders
Near-term focus lands on China’s high-frequency indicators—credit growth, trade figures, and inflation—alongside PBOC daily fixings and liquidity tools. Globally, the interplay with U.S. data and yields will steer USD performance, shaping the backdrop for USD/CNH and commodity FX. As the holiday boost fades, the burden of proof sits with policy transmission and stabilization in domestic orders, BPayNews notes.
Q&A
What is the RatingDog China General Manufacturing PMI and why does it matter?
It’s a private-sector gauge of Chinese factory activity compiled by S&P Global. A reading above 50 indicates expansion. Because China is a major driver of global demand, the PMI helps set risk sentiment across FX, equities, and commodities.
How could this PMI reading affect the yuan and broader FX markets?
A sub-50 print tends to pressure the yuan as growth expectations are marked down and easing prospects rise. Commodity-linked currencies like AUD can underperform when China data soften, while the U.S. dollar may find defensive support if risk appetite wanes.
What does the report say about pricing power and inflation?
Input costs increased on higher metal prices, but manufacturers cut output prices via discounts. That combination squeezes margins and suggests weak pass-through, adding to disinflation risks at the factory gate even as cost pressures persist.
Are exports offsetting domestic weakness?
Export orders improved at the fastest pace in eight months after the October U.S.–China trade thaw, but the gain wasn’t strong enough to offset softer domestic orders. Competitive pressures kept export prices subdued.
What should traders watch next?
Upcoming Chinese credit and trade data, CPI/PPI prints, and PBOC policy signals. Globally, U.S. labor and inflation releases will steer yields and the dollar, influencing USD/CNH, AUD/USD, and commodity trends.
Last updated on December 1st, 2025 at 01:50 am
