Asia’s Manufacturing Sector Faces Pressure as China’s Factory Activity Declines
Tokyo, Nov 1 – Asia’s manufacturers are experiencing increased pressure as factory activity in China has slipped back into decline in October. This development has clouded the recovery prospects for the region’s major exporters who are already grappling with weaker global demand and higher prices.
Purchasing managers’ indexes (PMIs) for factory powerhouses China, Japan, and South Korea all showed a shrinking of activity. Vietnam and Malaysia are also struggling with the broader consequences of China’s economic slowdown.
According to a private sector survey, China’s Caixin/S&P Global manufacturing PMI fell to 49.5 in October from 50.6 in September. This fall puts the index below the 50.0 point threshold that separates growth from contraction.
These findings are in line with another downbeat official PMI reading that was released on Tuesday, indicating an unexpected contraction in activity and raising doubts about the recent hopes of a recovery in the world’s second-largest economy.
Wang Zhe, an economist at Caixin Insight Group, commented on China’s survey outcome, stating that “Overall, manufacturers were not in high spirits in October.” He added that while signs of bottoming out have been observed in the economy, the foundation of recovery is not yet solid. Weak demand, along with internal and external uncertainties, continue to persist, leading to relatively weak expectations.
Japan and South Korea are among the countries feeling the impact of China’s slowdown, as their manufacturers heavily rely on demand from the Asian giant. Japan’s factory activity shrank for the fifth consecutive month in October, while South Korea’s factory activity fell for the 16th straight month. Taiwan, Vietnam, and Malaysia also reported continued declines in activity.
Additionally, India’s factory activity growth slowed for a second straight month in October due to softer demand and rising raw material costs, leading to subdued business confidence.
Shivaan Tandon, an economist specializing in emerging Asia at Capital Economics, highlighted the bleak outlook for manufacturing in the region in the near term, citing elevated inventory levels and weaker foreign demand as factors curbing production.
The International Monetary Fund (IMF) has also warned that China’s weak recovery and the risk of a prolonged property crisis could further dent Asia’s economic prospects. In its World Economic Outlook report released last month, the IMF revised down its growth estimate for Asia for next year to 4.2%, compared to the earlier projection of 4.4% made in April, and lower than the 4.6% forecast for this year.
The weakening of China’s manufacturing sector has raised concerns for the entire Asian region, with the impact being felt across major economies and calling for swift actions to support recovery and address the underlying challenges.
Reporting by Leika Kihara, Editing by Sam Holmes
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