China’s Factory Output Shrinks for Sixth Consecutive Month: Economic Slowdown and the Stimulus Dilemma
China’s factory output has shrunk for the sixth consecutive month in September 2025, highlighting persistent economic headwinds for the world’s second-largest economy. This ongoing contraction raises major questions about whether President Xi Jinping will launch another round of stimulus or wait for clarity on US trade negotiations under President Trump. 
Key Details
- China’s official manufacturing purchasing managers’ index (PMI) stood at 49.8 for September, marking its sixth straight month below the 50 threshold that separates growth from contraction.
- Non-manufacturing sectors, including services and construction, also stagnated, and the weak PMI readings underscore a broader slowdown.
- The pressure is mounting on Beijing amid sluggish domestic demand, a wobbly job market, and an ongoing property crisis.
- Analysts note that domestic manufacturers are delaying investments and output increases as they await clarity on whether China will receive further fiscal stimulus or if a trade breakthrough with the US will occur under the Trump administration.
Recent Stimulus Measures and Policy Choices
- In the past year, China has relied on a mix of monetary loosening, consumer loan subsidies, and fiscal spending boosts to support growth. These included cuts to lending rates, reduced reserve requirements for banks, and targeted support for housing and infrastructure.
- However, the effectiveness of these measures is debatable; the slowdown suggests that structural challenges and persistent external pressures—especially from US tariffs—are overwhelming short-term boosts.
- With the ruling Communist Party scheduled to review its five-year economic plan in October 2025, further stimulus may be on the table, but there is also caution about adding too much debt or inflating bubbles in real estate and lending.
Impacts and Broader Economic Effects
- Continued industrial stagnation threatens China’s 5% annual GDP growth target. Weakness in factory output ripples through supply chains, affecting export partners and commodity suppliers globally.
- The ongoing trade tensions with the US—compounded by new or threatened tariffs under President Trump—are driving uncertainty. This has disrupted supply chains, led to higher costs, and forced some Chinese firms to re-evaluate manufacturing and sourcing strategies
- Domestic challenges, like a soft job market and persistent real estate troubles, are dampening consumer confidence and spending—complicating recovery prospects even if external conditions improve.
- Some analysts expect that if there is no timely trade deal with the US, Beijing is more likely to roll out a fresh stimulus package, possibly after reviewing its economic blueprint in October.
Conclusion
China faces a delicate balancing act: reviving factory output and the broader economy without stoking excessive debt, all while navigating geopolitical friction with the US. President Xi Jinping must decide whether to act quickly with new stimulus or wait for signals from President Trump, as the next few months will be crucial for China’s economic trajectory and global market stability