China's manufacturing industry recovers: Glimmer of hope for the economy

China's manufacturing activity gained momentum in October for the first time in six months, an encouraging signal for policymakers. They are currently preparing a significant fiscal package to support the economy of the world's second-largest country. The latest data was released ahead of the crucial meeting of the National People's Congress Standing Committee, which is set to confirm the size of the fiscal stimulus to boost economic growth. The official Purchasing Managers' Index (PMI) rose to 50.1 in October, surpassing the September level of 49.8 and the Bloomberg analysts' average forecast of 49.9. A value above 50 indicates growth compared to the previous month. The non-manufacturing PMI slightly lagged analysts' forecasts in October but still reached 50.2. This shows that domestic consumption remains weak, although it has increased compared to September. Analysts estimate that China needs to spend up to 10 trillion RMB over the next three years to restore consumer confidence. The real estate sector has suffered a severe downturn, leading to income losses and layoffs. However, many experts believe the upcoming stimulus package will primarily be used to restructure local government finances through refinancing, as well as to purchase land and unsold properties to stabilize the weakened real estate market. An initial monetary stimulus in late September focused on the stock market and interest rates, causing the Chinese CSI 300 Index to surge as retail investors returned to the stock market. According to Morgan Stanley, the government began accelerating infrastructure projects in the fall to meet its growth target. Nevertheless, economic growth at 4.6% in the third quarter fell short of the official annual target of 5%. The Ministry of Finance indicated that the planned package would focus on local governments, which heavily depend on revenue from real estate sales. The restructuring of local finances is intended to enable these governments to settle payment arrears to suppliers and invest in infrastructure. Economists warn, however, that refinancing alone does not constitute actual stimulation. Ultimately, experts argue that direct support to households in the form of improved social benefits is key to long-term economic stabilization. Chi Lo of BNP Paribas Asset Management emphasized that Beijing has linked economic growth targets to structural reforms and the reduction of financial risks.