China’s Manufacturing Slump Deepens as Export Strategy Falters

China's factory activity contracted for the seventh consecutive month in October, with the official Purchasing Managers' Index dropping to 49.0 from 49.8 in September. This marks the lowest reading in six months, firmly below the 50-point threshold that separates contraction from expansion. The decline surprised economists who had forecast a 49.6 reading, according to Reuters polling.

The National Bureau of Statistics data reveals the limitations of China's export-driven stopgap measures. Manufacturers had front-loaded shipments earlier this year, particularly to the US market, attempting to offset weak domestic demand. This strategy of borrowing from future sales has now reached its logical conclusion, with export volumes faltering across traditional markets.

Factory owners are scrambling to diversify exports to Europe, Latin America, and Africa, but these markets cannot compensate for the $400 billion US import gap. Many manufacturers are now operating at losses, caught between shrinking global demand and inadequate domestic consumption. "The PMI drop contradicts expectations for Q4 stimulus through policy financing tools and government bonds," noted Xu Tianchen of the Economist Intelligence Unit.