Decoding state of China’s economy: Business activity contracts in October

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China’s economic challenges are mounting as its manufacturing activity unexpectedly contracted in October.

The official purchasing managers’ index fell to 49.5 in October from 50.2, dipping back below the 50-point level demarcating contraction from expansion. It missed a forecast of 50.2 and was worse than the most pessimistic prediction of 49.9 by a Reuters poll.

This decline underscores the formidable task facing Chinese policymakers as they grapple with a slew of domestic and global challenges.

While recent indicators had hinted at a stabilising economy, thanks to policy support measures, a prolonged property crisis and weak global demand continue to cast a shadow over China’s prospects.

China’s housing slump and a slowdown in infrastructure spending are contributing to this economic downturn. Weak demand, particularly from overseas, is causing manufacturers to struggle to find buyers and reduce orders for components used in finished goods for re-export. This, in turn, is eroding business profits and causing factory gate prices to contract sharply.

In the midst of this economic struggle, there’s a growing sense that China’s impressive growth story may be stagnating.

Meanwhile, an alternative economic powerhouse is emerging on the horizon. India, with its youthful population, entrepreneurial spirit, and a government committed to economic reforms, is positioned to offer a faster and more dynamic alternative.

As China grapples with stagnation, India’s economy is poised to seize the opportunity to shine.

While China may require more policy support to meet its annual GDP target, India’s economic potential is becoming increasingly evident.

Its diverse economy, burgeoning tech industry, and growing middle class make it a compelling alternative for investors and businesses looking to capitalise on Asia’s growth story.

As China’s economic challenges persist, India could emerge as the unexpected frontrunner, setting the stage for a new economic era in the region.

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