CaliToday (09/11/2025): China's economy presented a conflicting picture in October, as a slight rise in consumer prices offered a welcome reprieve from deflationary fears, even while the nation's critical manufacturing and export sectors signaled a deepening slowdown.
Chinese officials reported that the consumer price index (CPI) rose 0.2% in October compared to the same month last year. Authorities attributed this modest stabilization to a combination of domestic stimulus policies and a surge in consumer demand during the extended National Day and Mid-Autumn Festival holidays.
While the increase is marginal, it has temporarily eased market concerns about the risk of a deflationary spiral—a persistent fall in prices that can cripple economic growth.
Manufacturing and Trade Woes Persist
This consumer-side relief was starkly contrasted by grim data from the industrial heartland.
The official Purchasing Managers' Index (PMI) a key gauge of factory health fell to its lowest level in six months. The data for October showed a contraction in both new orders and employment, indicating that factories are struggling with weak demand both at home and abroad.
The external picture was equally bleak. Chinese exports unexpectedly fell in October, undermining hopes for a trade-led recovery.
The decline was led by a severe drop in trade with the United States. Shipments to the U.S. plummeted by 25%, marking the seventh consecutive month of double-digit declines. This sustained weakness highlights the severe impact of the ongoing trade dispute and tariffs on bilateral commerce.
A Fragile Trade Truce
Despite the grim data, a recent diplomatic development has offered a tentative glimmer of hope.
The outlook for trade may stabilize following a "trade truce" agreed upon by President Xi Jinping and U.S. President Donald Trump in South Korea on October 30. Analysts suggest this agreement, while not a comprehensive resolution, has significantly reduced the immediate risk of a full-scale, escalating trade war.
However, businesses remain cautious, awaiting concrete details on tariff rollbacks.
Beijing's Long-Term Pivot
The persistent weakness in exports and heavy industry underscores the urgency of Beijing's strategic pivot.
In its new five-year plan, the Chinese government has formally committed to rebalancing the economy. The plan emphasizes boosting domestic consumption and fostering "effective investment" (such as in high-tech and green energy) to build a more resilient economic model. The goal is to transition away from the old growth drivers and reduce the nation's long-standing dependence on exports and heavy industry.