As China’s nascent economic recovery teeters, Asia’s manufacturing sector faces escalating challenges, impacting major exporters grappling with weaker global demand and increased prices. Purchasing managers’ indexes (PMIs) for manufacturing powerhouses China, Japan, and South Korea indicate shrinking activity, with Vietnam and Malaysia also feeling the repercussions of a broader economic slowdown.
China’s Caixin/S&P Global manufacturing PMI fell to 49.5 in October from September’s 50.6, slipping below the 50.0 point threshold that distinguishes growth from contraction. This private sector survey mirrors an official PMI reading, casting doubt on the anticipated recovery in the world’s second-largest economy.
Wang Zhe, an economist at Caixin Insight Group, remarked, “Overall, manufacturers were not in high spirits in October,” highlighting the fragility of China’s economic recovery. Weak demand, internal and external uncertainties, and tepid expectations contribute to the challenges faced by the Chinese economy.
The ripple effect of China’s slowdown extends to countries heavily reliant on Chinese demand, such as Japan and South Korea. Japan reported shrinking factory activity for the fifth consecutive month in October. South Korea experienced a 16th straight month of falling factory activity, and PMIs from Taiwan, Vietnam, and Malaysia also indicated continued declines.
India’s factory activity growth slowed for a second consecutive month in October, influenced by softer demand and rising raw material costs.
Shivaan Tandon, an emerging Asia economist at Capital Economics, noted, “The October PMIs for emerging Asia generally dropped back further inside contractionary territory,” highlighting the challenging outlook for manufacturing in the region. Elevated inventory levels and weaker foreign demand are expected to curtail production in the near term.
The International Monetary Fund (IMF) has expressed concerns that China’s fragile recovery and the potential for a prolonged property crisis could further impact Asia’s economic prospects. In its World Economic Outlook, the IMF revised next year’s growth estimate for Asia to 4.2%, down from the earlier projection of 4.4%, and below the 4.6% forecast for the current year.
As Asia grapples with economic uncertainties, the manufacturing sector faces a challenging near-term outlook. The region’s resilience will be tested amidst weakened demand, supply chain disruptions, and ongoing global economic shifts.
Source: Reuters
