1 China’s export growth turns negative in October as front-loading effect fades
China’s Oct exports see worst decline since Feb
Nov. 7
The PRC General Administration of Customs published China’s trade data for October and the first 10 months of the year.
Exports
- China’s exports fell 1.1 percent year-on-year in October 2025, well below market expectations of 2.3 percent growth. This represented a sharp reversal from 8.3 percent growth in September and was the first month of negative export growth since March 2024 (excluding February 2025 due to traditionally fewer exports during the Chinese New Year Period).
- China’s exports to the United States fell 24.5 percent in October 2025, marking the seventh straight month of double-digit declines. China’s exports to the U.S. totaled $352.14 billion for the first 10 months of 2025, down 17.7 percent year-on-year.
- Structural exports data show:
- Exports of mechanical and electrical products, which accounted for 60.7 percent of total exports, increased by 8.7 percent in October to 13.43 trillion yuan. Within that category of exports, integrated circuits rose 24.7 percent and automobiles increased 14.3 percent.
- Exports of labor-intensive goods fell 3 percent.
Imports
- China’s imports grew 1.0 percent year-on-year in October 2025 (1.0 percent lower compared with official PRC data for 2024), a significant drop from September’s 7.4 percent (down 9.5 percent month-on-month).
- China’s trade surplus narrowed slightly from $90.45 billion in September 2025 to $90.07 billion in October.
- China’s soybean imports hit 9.48 million tons in October, the highest monthly volume on record. This reflects China’s fulfillment of agricultural purchase commitments as part of U.S.-China trade easing agreements.
- Prices of bulk commodities generally declined:
- The average price of iron ore dropped 10.7 percent.
- Crude oil fell 12.1 percent.
- Coal fell 24.5 percent.
Manufacturing PMI slows
Nov. 3
The RatingDog China Manufacturing PMI, compiled by S&P Global, fell from 51.2 in September 2025 to 50.6 in October 2025. While the index remains in expansion territory, the pace of growth has noticeably slowed. The index, which is based on a private survey of around 650 mostly small and medium-sized manufacturers, usually paints a better picture than Beijing’s official index as it focuses more on export-oriented manufacturers.
RatingDog’s sub-indices show that China’s new export orders slipped into contraction, with both demand and production expansion weakening. Growth in purchasing activity slowed, and business confidence fell to a six-month low. RatingDog founder Yao Yu noted that except for the employment index improving in October from the previous month, “all other sub-indices declined to varying degrees.” Also, the pace of job creation only showed a modest increase despite growing at the fastest in over two years. Companies reported rising trade uncertainty as the main drag on business.
RatingDog’s services PMI fell to 52.6 in October from 52.9 in September to hit a three-month low. Growth in new business came mainly from the domestic market, while overseas demand deteriorated wildly with new export business slipping into contraction. Yao Yu pointed out that continued employment contraction and pressure on profit margins remain the main challenges facing the services sector.
The National Bureau of Statistics’ manufacturing PMI for October 2025 came in at 49.0, down 0.8 percentage points from September and below the 50 point market separation expansion from contraction for the seventh consecutive month. Other sub-indices include:
- New orders: 48.8 percent (down 0.9 percentage points month-on-month)
- Production: 49.7 percent (down 2.2 percentage points month-on-month)
- Raw material inventory: 47.3 percent (down 1.2 percentage points month-on-month)
- New export orders: 45.9 percent (down 1.9 percentage points month-on-month)
The official non-manufacturing business activity index came in at 50.1 percent (up 0.1 percentage points month-on-month), with the services and construction sub-indices at 50.2 percent and 49.1 percent respectively.
The official composite PMI output index stood at 50.0 percent, or right at the expansion-contraction threshold.
Our take
1. The dual deceleration in exports and manufacturing PMI in October signals a gear shift in China’s growth engine from a rapid spurt to a slow crawl. The slowdown indicates that China’s export performance in the first three quarters, fueled by front-loading shipments and equipment exports amid supply chain relocation, was inherently transitory and unsustainable. Also, U.S. tariff pressures accelerated capacity migration to Vietnam and Mexico, temporarily inflating China’s role as an equipment supplier. This dynamic boosted China’s short-term data but failed to forge long-term competitiveness.
Tighter transshipment oversight emerges as another critical variable to China’s export slowdown. Elevated export shares to ASEAN and Hong Kong in the first nine months of 2025 raised suspicions of origin laundering. Meanwhile, U.S. Customs crackdowns appear to have blocked rerouting channels in the fourth quarter, directly compressing volumes. The contraction of China’s exports to the U.S. by double-digits for seven straight months and the 25 percent drop in October points to structural demand deterioration rather than a mere cyclical fluctuation.
Some of the October export decline may also stem from the high base effect. In October 2024, exports surged 12.7 percent as firms rushed shipments in anticipation of tariff risks. Meanwhile, a typhoon in September last year shifted some shipments into October, further raising the comparison base. On top of that, with the US holiday-season stocking cycle now over, the front-loading effect is gradually fading.
2. Various PMI readings provide micro-level corroboration of the slowdown in China’s manufacturing sector. Both private and official surveys converge on waning manufacturing momentum, particularly in export orders and production. The private PMI, more representative of SMEs, captures shrinking new export orders and deteriorating business confidence and better mirrors order declines at coastal factories. Meanwhile, the official PMI, below 50 percent for seven consecutive months, signals capacity underutilization and inventory pressure even among large enterprises. Together, private and official PMI readings deliver a double warning for manufacturing sentiment.
At the macro level, export weakness amplifies domestic demand frailty. Fixed asset investment fell 0.5 percent in the first three quarters and retail sales grew a subdued 4.5 percent, both below the official 5.2 percent GDP growth. Meanwhile, industrial output grew 6.2 percent, but corporate income tax revenue rose only 0.8 percent and PPI remained in deflation, indicating that higher export volumes have not translated into profit improvement. The sharp slowdown in October import growth further reflects persistently weak domestic demand.
From a policy standpoint, Beijing faces a dilemma. Continually leaning on exports risks exacerbating overcapacity and intensifying price wars. However, pivoting to domestic demand requires breaking through the bottlenecks of real estate malaise, high household leverage, and confidence deficits. The U.S.-China trade truce does offer a temporary respite — evidenced by record soybean imports and fentanyl tariff relief — but cannot reverse the long-term trajectory of global supply chain reconfiguration. Already, strategic moves by the US and its allies in critical minerals have weakened China’s bargaining power in resource markets.
3. In sum, the decline in exports and the PMI in October exposes structural vulnerabilities in China’s growth model. While the trade truce provides short-term cushioning, Beijing’s export path dependence remains largely unchanged, leaving the economy vulnerable to external shocks and internal imbalances.
2 Analyzing Xi’s inspection of Hainan and Guangdong post-4th Plenum
Xi Jinping inspects Hainan
Nov. 6
PRC state media reported that Xi Jinping reviewed briefings on the construction of the Hainan Free Trade Port in Sanya City. Zheng Shanjie, director of the National Development and Reform Commission, and Feng Fei, Hainan Province Party secretary, delivered reports on the subject. Cai Qi, director of the CCP General Office, and PRC vice premier He Lifeng also attended the briefings.
State media said Xi delivered an important speech after hearing the briefings. Xi said that Party Central has decided that the Hainan Free Trade Port will officially begin full-island customs closure operations from Dec. 18, 2025. He described this as a landmark move for China to “expand high-level opening up” and promote “the building of an open world economy.”
Xi also stressed that the more China opens up, the more it must “balance development and security,” and “firmly hold the bottom line of security.” He called for a “well-planned and orderly pace of opening up, strengthened risk identification and prevention, and a steady, step-by-step approach.”
Xi further emphasized the need to “resolutely advance comprehensive strict governance of the Party.”
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Hainan Free Trade Port is the core of the CCP authorities’ master plan (issued on June 1, 2020) for the conversion of Hainan into a free trade zone. State media described the Port as a “major reform and opening up initiative” that was personally planned, directed, and promoted by Xi Jinping.
Beijing aims to turn Hainan Island into China’s largest special economic zone, and is positioning it as a showcase of the PRC’s so-called “high-level opening up,” as well as economic quality and efficiency.
The main elements of the plan can be summarized as follows:
Six types of liberalization and facilitation
- Trade liberalization and facilitation: Zero tariffs, low tax rates, streamlined customs procedures (for example, full-island customs closure by 2025).
- Investment liberalization and facilitation: A negative list system allowing foreign investment into more sectors.
- Cross-border capital flow liberalization and facilitation: Capital account convertibility and improved foreign exchange management.
- Liberalization and facilitation of personnel movement: Visa exemptions and talent recruitment policies (including a “zero-visa” policy).
- Liberalization and facilitation of transportation: Integrated air and sea logistics and expanded international routes.
- Safe and orderly data flows: Rules for cross-border data transmission to safeguard data sovereignty.
Modern industrial system
- Leveraging Hainan’s advantages, undertake a major development of tourism, modern services (finance, logistics, conventions and exhibitions, etc.), and high-tech industries (internet, healthcare, marine economy, etc.). Polluting and energy-intensive industries are banned, with the goal of upgrading industry and developing “new quality productive forces.”
Implementation steps and timeline
- Phase 1 (2020–2025): Launch full-island customs closure operations by the end of 2025, and basically establish systems for liberalized and facilitated trade and investment. Key tasks include introducing zero-tariff and negative lists to attract global capital and talent.
- Phase 2 (2025–2035): Build a high-level free trade port aligned with international standards. By 2035, Hainan’s GDP is expected to double twice and the island is intended to become a “globally influential hub of openness.”
Xi commissions PLAN’s latest carrier
Nov. 5
Xi Jinping attended the commissioning and flag-presenting ceremony of the Fujian, the PRC’s first aircraft carrier equipped with electromagnetic catapults, at a naval port in Sanya.
State broadcaster CCTV’s prime-time program Xinwen Lianbo spent nearly 10 minutes covering the event in its Nov. 7 broadcast. Xinwen Lianbo’s footage showed new Central Military Commission vice chairman Zhang Shengmin presiding over the event, with Cai Qi and PRC vice premier Zhang Guoqing also in attendance.
Xi inspects Guangdong
Nov. 7 – Nov. 8
State media reported that Xi Jinping visited the cities of Meizhou and Guangzhou in Guangdong Province for an inspection tour. Xi was accompanied by Guangdong Party secretary Huang Kunming and Guangdong governor Meng Fanli, as well as Cai Qi and He Lifeng.
On Nov. 7, Xi visited the Ye Jianying Memorial Park and former residence, and laid a flower basket before Ye Jianying’s statue at the memorial hall.
The next day, Xi listened to a work report from the Guangdong Provincial Party Committee and provincial government. He then affirmed Guangdong’s achievements in various areas and laid out requirements for the next stage of work.
Per state media, Xi said that Guangdong — as a major economic province and developed region — must take a high-level and broad strategic view in drafting the 15th Five-Year Plan, as well as demonstrate responsibility in taking the lead, setting an example, and shouldering major tasks.
Xi added that it is essential that the Guangdong government does its work well, as well as strengthen the Party’s leadership and advance comprehensive strict governance of the Party in all regards.
Nov. 9
While in Guangzhong, Xi Jinping met with representatives of nationally recognized advanced units and individuals in mass sports, as well as representatives of advanced collectives and individuals from the national sports system, according to state media reports. Xi was accompanied at these meetings by Li Hongzhong, vice chairperson of the National People’s Congress; Zhang Youxia, vice chairman of the Central Military Commission; Guangdong Party secretary Huang Kunming; State Councilor Shen Yiqin; and Wang Dongfeng, vice chairman of the CPPCC.
That evening, Xi and his wife Peng Liyuan attended the opening ceremony of the 15th PRC National Games, the first time the event has been jointly hosted by Guangdong, Hong Kong, and Macau. State media reported that leaders from the three regions delivered speeches praising Xi’s leadership:
- Guangdong Party secretary Huang Kunming said that when the nation prospers, sports prosper. Under Xi’s strategic leadership, the strengthening of the nation and the strengthening of sports advance together.
- Hong Kong chief executive John Lee said that this is the first time Hong Kong has participated in the National Games as a host city since its return to China. He said he felt “immensely honored, grateful for the trust of the central government, and especially grateful to President Xi Jinping for attending the opening ceremony in person.”
- Macau chief executive Sam Hou Fai said that this jointly hosted National Games demonstrates the vivid practice of the institutional advantages of “One Country, Two Systems.”
Our take
Xi Jinping’s inspection of Guangdong and Hainan, as well as the commissioning of the Fujian aircraft carrier, follow the conclusion of the Fourth Plenum of the 20th Central Commission and the extension of the U.S.-China trade “truce” by a year. Those meticulously choreographed series of events continue Beijing’s propaganda campaign from the 2025 military parade that seeks to promote Xi’s political “achievements” and the centrality of his rule to the PRC’s “successful” development. This propaganda push does the double duty of consolidating Xi’s “quan wei” (authority and prestige) and covering up his errors as the PRC faces more pressure from increased geopolitical tensions and worsening economic decline.
1. The Fujian being placed into active service boosts Xi Jinping’s quest to create a “strong military” and project the PRC’s power further from its shores, but not by much. The People’s Liberation Army’s latest aircraft carrier does represent an upgrade from its previous two carriers, which lack catapult systems that are standard on U.S. carriers and are much more limited in their capabilities. However, the Fujian is still less capable than its American counterparts, being conventionally powered instead of nuclear (affecting operational range and catapult system capabilities) and not being able to carry as many aircraft (affecting operational and combat capabilities).
The PLAN faces several hurdles to catching up with the United States Navy in terms of aircraft carriers. For one, the U.S. Navy has operated carriers for far longer than the PLAN and in actual combat situations. The U.S. Navy also has 11 carriers compared to the PLAN’s three. While the PRC’s shipbuilding process is fast, the PLAN still requires time to get used to the carrier platform and the acquisition of experience and know-how cannot be accelerated through Beijing’s administrative orders.
From the political perspective, the Xi leadership’s commissioning of the Fujian at this time could be intended partly to boost the military’s confidence and offset somewhat the political turbulence that was generated by the purge of nine generals ahead of the Fourth Plenum. Putting the carrier into active service also adds to Xi’s political “achievements” in the lead up to the 21st Party Congress.
2. With Zhang Shengmin joining Xi Jinping in Hainan for the commissioning of the Fujian and Zhang Youxia joining Xi in Guangdong for the 15th National Games, Xi appears to have resumed the practice of having a CMC vice chairman accompany him on some inspection tours or key events (particularly when the military is involved).
Previously, the absence of Zhang Youxia from some of Xi’s travels to the provinces for various events fueled speculation that Xi was losing control over the PLA. We explained at the time that there was nothing irregular about Zhang’s absence because CMC vice chairmen are typically not required to accompany the CCP leader in attending events and that Zhang could have been otherwise occupied at the time with the Xi leadership’s intense rectification of the PLA. In the case of the Tibet founding anniversary celebration, Zhang could have been busy overseeing parade preparations alongside his other pressing duties; incidentally, Xi had brought Zhang Shengmin, who would later be elevated to CMC vice chair and whose promotion was likely already decided at the time, with him to Tibet.
3. Xi Jinping’s trip to Hainan and review of briefings on the province’s development as a special economic zone is likely intended in part to signal to other countries that the PRC remains committed to “high-level opening up” despite its ongoing trade conflict with the United States and growing “unilateralism” and “de-globalization” in the world.
Hainan’s prospects, however, are much dimmer now as compared to when Beijing rolled out its plan to transform the province into a free trade port in 2018. At the time, China’s official GDP growth was 6.6 percent and foreign investment was at record highs. Now more and more countries are cutting exposure to China (China’s FDI inflows fell 31.5 percent year-on-year in the first three quarters of 2025, the lowest since 1998) and shifting supply chains out of the mainland, and China’s GDP growth is noticeably lower than what its official figure suggests (for e.g., see here and here).
Domestic demand in China is also much weaker now than it was in 2018. In the first three quarters of 2025, imports fell 8.4 percent while total retail sales of consumer goods grew only 4.1 percent (far below the pre-pandemic norm of around 8 percent). Like many provinces, Hainan is feeling the effects of deflationary pressures and overall economic decline. For instance, duty-free shopping turnover rose 12 percent in the first half of 2025, but this was driven primarily by mainland “daigou” buyers (i.e. individuals not living in Hainan) while local purchasing power contracted. China’s real estate downturn is impacting Hainan, with fixed asset investment growth in the province coming in at only 2.3 percent in the first three quarters of 2025 (well below the national average) and with dozens of half-finished projects becoming symbols of stalled development.
Under the dual pressures of weakening domestic and external demand, Hainan’s special economic zone project is at risk of becoming another Xiong’an New Area. Announced in April 2017, the Xiong’an project was intended to relieve Beijing’s overcrowding, foster innovation, and serve as a “model city of the future.” Eight years in and after massive infrastructure spending (over 835 billion yuan in investment), however, Xiong’an today is a “ghost town” far from what the Xi leadership envisioned. Should Hainan fail to build up its port and high-tech industrial capacity in the near term, the project could share a similar fate as Xiong’an’s (sunk assets drive collapsing expectations that in turn lead to de facto suspension of the project) and become a further drag on the Chinese economy.
4. By making Guangdong one of his first stops post-Fourth Plenum, Xi Jinping is both showing support for his political ally Huang Kunming amid tough times and signaling that the province — a traditional economic powerhouse — must continue providing major fiscal support to the central government to keep the regime running.
However, the harsh reality of Guangdong’s economy threatens the official narrative and Xi’s expectations. Guangdong’s official data for the first three quarters of 2025 showed:
- Fixed asset investment growth came in at minus 14.1 percent.
- The construction sector shed 1.06 million jobs.
- Total retail sales of consumer goods fell 3.2 percent, marking the first negative growth since the 2020 lockdowns and contradicting the National Bureau of Statistics’ reported national growth of 4.5 percent.
- Profits at industrial firms above a designated size fell 7.3 percent.
The above statistics indicate that Guangdong’s manufacturing sector is operating at a loss, with a spreading wave of layoffs.
4. The attendance of Xi Jinping and the top leaders of Guangdong, Hong Kong, and Macau at the 15th PRC National Games is essentially a united front performance aimed at showcasing the “success” of the “One Country, Two Systems” and “Three Regions, Three Systems” models. Displays such as this are almost certainly intended to “lure” Taiwan into accepting “peaceful reunification” with the mainland in the long term.
But in the aftermath of Hong Kong’s extradition bill crisis and given Macau’s reliance on mainland tourists for its gaming industry, the united front “spectacle” of the 15th National Games will more practically serve the CCP authorities’ need to emphasize its leadership over the two SARs and have barely any chance of moving the needle on the “reunification” question in Taiwan.
