China's economy is slowing. Why Australia's iron ore exporters should be concerned
China's manufacturing and construction activity contracted in October, with construction new orders falling to 40.0. We explain the PMI figures and the implications for Australian iron ore exports.
China's latest economic figures reveal a sharp deterioration in manufacturing and construction activity, raising concerns about future demand for Australian iron ore.
On 31 October, China's National Bureau of Statistics released its October Purchasing Managers' Index (PMI) results.
The manufacturing PMI fell from 50.1 in September to 49.3 in October, while the construction index dropped from 50.3 to 48.0.
More concerning, construction new orders fell from 45.7 to just 40.0.
What do these figures actually measure?
The PMI is a monthly survey of purchasing managers measuring changes in business activity, orders, production and employment.
A reading above 50 indicates expansion compared with the previous month; below 50 indicates contraction.
Importantly, a reading of 49.3 does not mean manufacturing output fell 0.7%. It indicates that declining activity outweighs increasing activity across the surveyed businesses.
The figures are therefore early indicators of economic conditions, not measurements of GDP growth.
Is the slowdown widespread?
Manufacturing production declined from 51.7 to 49.8, while new manufacturing orders fell from 50.5 to 49.4.
Export orders also weakened, reaching 48.7.
However, some industries remain strong. High-technology manufacturing recorded 51.3, while large manufacturers remained marginally above 50.
Chinese officials also noted that the October holiday may have shifted activity into September.
Why does Australia care?
China purchased $196 billion of Australian exports in 2025, representing 29% of Australia's total goods and services exports.
Iron ore is particularly exposed to Chinese construction and steelmaking.
Australia's latest export-price statistics already show prices for metalliferous ores and scrap falling 6.4% in the September quarter.
Continued Chinese construction weakness could reduce iron ore demand, mining profits, company tax receipts and Western Australian royalties.
However, PMI figures alone cannot establish how much steel production or iron ore imports will decline.
The real test is whether weaker construction orders translate into sustained reductions in Chinese steel production and iron ore purchases.
For Australia, China's construction slowdown matters more than the headline manufacturing number.
|
Above 50 Expansion |
50 |
Below 50 Contraction |
| PMI measure | Sep | Oct | Change |
|---|---|---|---|
| Manufacturing | 50.1 | 49.3 | −0.8 |
| Manufacturing production | 51.7 | 49.8 | −1.9 |
| Manufacturing new orders | 50.5 | 49.4 | −1.1 |
| New export orders | 50.0 | 48.7 | −1.3 |
| Construction activity | 50.3 | 48.0 | −2.3 |
| Construction new orders | 45.7 | 40.0 | −5.7 |
|
$196bn
Australian goods and services exports to China in 2025
|
−6.4%
Metalliferous ores and scrap export prices, September quarter 2026
|