Today’s briefing focuses on Thailand’s improving manufacturing activity, South Korea’s major AI investment programme, China’s efforts to manage currency appreciation and stabilise its stock market, and diverging manufacturing trends across Asia.
Thailand’s manufacturing PMI reaches a 10-month high as new orders accelerate
Thailand’s manufacturing sector strengthened in October, with the S&P Global Manufacturing Purchasing Managers’ Index (PMI) rising to 54.8 from 54.3 in September, its highest reading since December 2025. The improvement reflected stronger new orders, accelerating production and expanding customer bases, although manufacturers also reported mounting unfinished orders and workforce constraints. The latest figures were released on Monday, 2 November. Thailand Business News: Economics coverage.
Key points
- Manufacturing PMI increased to 54.8 from 54.3, signalling stronger expansion.
- Production grew at its fastest pace since December 2025, while purchasing activity accelerated to its strongest rate since August 2024.
- Outstanding business accumulated at its fastest pace in nearly a year, partly reflecting reduced workforce capacity and employee resignations.
The increase suggests that Thailand’s manufacturing recovery is gaining momentum, supported by improving domestic demand and stronger orders. Companies reported that successful promotional activities and an expanding customer base contributed to the increase in new business. Manufacturers also stepped up purchasing to meet production requirements and replenish inventories, indicating greater confidence in near-term demand.
However, the growing backlog of unfinished orders reveals an important supply-side constraint. Companies are receiving more business than they can comfortably process, with staff departures and reduced workforce capacity limiting their ability to expand production at the same pace as demand. Input costs also edged higher, although manufacturers largely kept selling prices unchanged to protect sales volumes.
The improvement comes against a background of structural difficulties in Thailand’s industrial sector. Thailand Business News previously examined the problem in its analysis of manufacturing underutilisation and intensifying Chinese competition, which highlighted weak capacity utilisation and pressure on domestic manufacturers. The workforce issue is equally important: an earlier report identified demand for more than one million skilled professionals across Thailand’s priority industries, as discussed in Thailand’s growing shortage of skilled professionals.
The October PMI is encouraging, but it is a survey-based indicator rather than a direct measurement of industrial output. Sustained improvements will depend on whether businesses can recruit workers, increase productivity and convert new orders into completed production and exports.
Why it matters: Manufacturing is central to Thailand’s employment, exports and industrial investment. The latest PMI suggests improving business conditions, but labour shortages and capacity constraints could prevent manufacturers from fully capitalising on stronger demand.
Sources: S&P Global manufacturing data via Trading Economics
South Korea commits US$16 billion to AI as inflation remains above the central bank’s target
South Korea is preparing a major expansion of public investment in artificial intelligence, semiconductors and data centres, with President Lee Jae Myung asking parliament to approve a record 820.9 trillion won (approximately US$615.6 billion) budget for 2027. The proposal allocates 21.3 trillion won, approximately US$16 billion, to AI and three strategic technology projects, nearly doubling this year’s allocation. The announcement coincided with October inflation data showing that consumer prices remain above the Bank of Korea’s target. Thailand Business News: Technology coverage.
Key points
- The proposed 2027 national budget totals 820.9 trillion won, up 12.8% from the previous year.
- AI, semiconductors, physical AI and AI data centres will receive 21.3 trillion won, nearly twice this year’s allocation.
- October consumer inflation eased to 2.8% from 2.9% in September, but remained above the Bank of Korea’s 2% target.
The investment programme reflects Seoul’s determination to maintain its position in the global semiconductor industry while developing capabilities in next-generation AI applications. South Korea’s exports reached US$930 billion between January and October, putting the country within reach of the US$1 trillion annual milestone. Semiconductor demand has been a major contributor to export growth and the earnings of its largest technology manufacturers.
The proposed budget also establishes a 162.3 trillion won Future Response Fund, financed largely through additional tax revenues generated by the semiconductor boom. It is intended to support strategic industries, education, regional development and younger workers. The government projects that the fiscal deficit will narrow to 0.1% of GDP in 2027, from 3.9% this year, while public debt is expected to decline to 48.3% of GDP. The proposal still requires parliamentary approval.
The inflation figures illustrate the monetary-policy challenge accompanying this expansion. Consumer prices rose 2.8% year on year in October, compared with 2.9% in September, while monthly inflation was 0.2%. Although the moderation provides some relief, elevated energy prices and rising household borrowing continue to concern policymakers. Market expectations point to a possible additional interest-rate increase in November, with the policy rate potentially reaching 3.5% during the tightening cycle. Reuters
The investment strategy builds on South Korea’s growing role in the global AI semiconductor supply chain. Thailand Business News previously covered Samsung Electro-Mechanics’ strategic partnership with NVIDIA and Air Liquide’s investment supporting SK hynix’s advanced memory-chip production. These projects demonstrate how government policy, private investment and international suppliers are reinforcing the country’s technology ecosystem.
Why it matters: South Korea is using fiscal policy to strengthen its position in industries expected to shape global growth over the coming decade. Its investment programme will intensify competition for semiconductor investment, advanced manufacturing talent and data-centre infrastructure across Asia, including Thailand.
China raises foreign-exchange reserve requirements to slow the yuan’s appreciation
China’s central bank announced on Tuesday, 3 November, that it will raise the foreign-exchange reserve requirement ratio for financial institutions from 4% to 6%, effective 15 November, in an effort to slow the yuan’s rapid appreciation against the US dollar. The measure will require financial institutions to hold a larger proportion of their foreign-currency deposits at the central bank, tightening available dollar liquidity in the domestic financial system. Thailand Business News: China coverage.
Key points
- The foreign-exchange reserve requirement will rise by two percentage points, from 4% to 6%, on 15 November.
- Reuters estimates the adjustment will withdraw approximately US$24 billion in liquidity from the financial system.
- The yuan has appreciated more than 5% against the dollar in 2026, supported by strong exports, trade surpluses and corporate currency conversions.
The People’s Bank of China said the adjustment is intended to strengthen management of foreign-exchange liquidity at financial institutions. By requiring banks to retain more foreign currency as reserves, the central bank reduces the amount of dollars available for trading and conversion into yuan. This should help moderate the currency’s appreciation without requiring a direct change to benchmark interest rates.
The intervention reflects Beijing’s concern that excessive currency strength could eventually undermine export competitiveness. Chinese exporters have benefited from robust international demand and substantial trade surpluses, while companies converting foreign-currency earnings into yuan have contributed to appreciation pressure. A stronger currency can reduce the domestic-currency value of export revenues and make Chinese products more expensive for overseas buyers.
The decision also reverses the direction of the central bank’s September 2023 adjustment, when it reduced the foreign-exchange reserve requirement to support the yuan during a period of depreciation and capital outflows. The latest move illustrates how monetary authorities are now dealing with the opposite challenge: managing the speed of currency gains rather than preventing losses.
The development forms part of China’s broader currency strategy. Thailand Business News previously examined Beijing’s ambition to strengthen the yuan’s international role in its analysis of China’s efforts to position the renminbi as a global reserve currency. Its earlier report on the yuan as an alternative to the US dollar also explored the implications for international trade and emerging-market currencies.
For Thailand, currency adjustments in China can influence regional exchange rates, export competitiveness and trade settlement. A more controlled yuan appreciation could affect the relative pricing of Chinese and Thai manufactured goods, particularly in markets where both countries compete for international customers.
Why it matters: The PBOC’s decision shows that China is increasingly concerned about the economic consequences of a rapidly strengthening currency. Its actions could influence Asian exchange rates, regional trade competitiveness and financial-market liquidity over the coming weeks.
Sources: Reuters — China to raise FX reserve requirement to slow pace of yuan gains, 3 November 2026
Beijing deploys fresh liquidity measures to stabilise China’s stock market after October sell-off
Chinese financial regulators announced a new package of market-support measures on Monday, 2 November, after the benchmark CSI 300 index fell 8.5% in October, its worst monthly performance since early 2016. The People’s Bank of China and securities regulators are seeking to restore investor confidence through liquidity facilities, lower-cost financing for share buybacks and pressure on major listed companies to support their valuations. Thailand Business News: Banking coverage. Reuters
Key points
- The PBOC will conduct swap operations that could provide more than 100 billion yuan, approximately US$15 billion, for stock-market purchases.
- The central bank made its share-buyback relending programme permanent and reduced its interest rate from 1.25% to 1%.
- Regulators urged major companies and index constituents to buy back shares and are considering easing margin requirements to improve liquidity.
The latest swap operation will allow securities firms, insurers and fund companies to obtain liquidity for purchasing stocks. The PBOC said 31 brokers and fund companies had already applied for swaps worth more than 100 billion yuan. The bidding process is scheduled for Tuesday, 3 November. This will be the third use of the facility, which was established to support capital-market financing.
The central bank also announced that its relending facility for share buybacks and purchases would become a permanent programme rather than a temporary arrangement. Reducing the interest rate to 1% lowers the financing cost for eligible institutions and companies undertaking share purchases. Separately, the China Securities Regulatory Commission encouraged major index constituents and leading technology companies to conduct buybacks, while asking newly established exchange-traded funds to accelerate their investment activity.
The intervention follows persistent weakness in Chinese equities, reflecting concerns about sluggish consumption, the prolonged property-sector debt crisis and declining technology valuations. Although the Shanghai Composite gained 1.1% on Monday in anticipation of the announcements, the measures do not directly address the underlying problems affecting corporate profitability and household confidence. Their effectiveness will depend on whether additional liquidity attracts sustainable investment rather than producing only temporary price support.
The approach resembles an earlier intervention. Thailand Business News reported on the PBOC’s original 500 billion yuan capital-market funding initiative in its October 2024 coverage of the central bank’s swap facility. The current programme builds on that framework but places renewed emphasis on buybacks and direct support for market liquidity.
For regional investors, Chinese equity-market stability matters because the country’s financial conditions influence capital flows, technology valuations and investor sentiment throughout Asia. A prolonged downturn could also affect companies across Southeast Asia that depend on Chinese investment, financing or consumer demand.
Why it matters: Beijing is demonstrating its willingness to use central-bank liquidity and regulatory measures to support equity valuations. However, restoring investor confidence sustainably will require stronger economic fundamentals, especially household consumption, corporate earnings and greater certainty about China’s property sector.
Asian factory growth diverges as Southeast Asia gains momentum while major chip exporters slow
Manufacturing activity across Asia continued expanding in October, but growth slowed in several major technology-exporting economies as higher energy costs, shipping disruptions and inflation weighed on industrial confidence. Private purchasing-manager surveys published on Monday, 2 November, showed slower expansion in China, Japan, South Korea and Taiwan, while manufacturers in Vietnam, Indonesia and Malaysia reported stronger momentum. Thailand Business News: ASEAN coverage. Reuters
Key points
- Japan’s manufacturing PMI fell to 53.3 from 54.1, South Korea’s declined to 51.3 from 53.9, and Taiwan’s dropped to 54.9 from 56.7.
- China’s private RatingDog manufacturing PMI eased to 52.0 from 52.1, while Indonesia’s PMI accelerated to 54.0 from 52.4.
- Vietnam, Indonesia and Malaysia recorded faster manufacturing expansion, contrasting with slower growth among several established technology exporters.
The divergence highlights the changing geography of Asian industrial growth. Japan, South Korea and Taiwan have benefited significantly from global demand for semiconductors and AI-related products, but the latest surveys suggest that this momentum is no longer sufficient to offset every external pressure. Japanese manufacturing growth slowed to a seven-month low, while South Korea recorded its weakest output expansion in eight months. Taiwan also experienced slower new-order growth and longer supplier delivery times.
China’s manufacturing picture remains mixed. The private RatingDog survey showed a PMI of 52.0, indicating continued expansion for an 11th consecutive month, although it slipped slightly from September. Official manufacturing data, however, showed contraction in October for the third time in four months. The divergence between the two surveys illustrates the uneven performance of China’s industrial economy, particularly between export-oriented manufacturers and businesses exposed to domestic demand and construction.
Southeast Asia is showing comparatively stronger momentum. Indonesia’s PMI climbed to 54.0, its strongest reading since March 2024, supported by expanding output and particularly strong new export orders. Vietnam and Malaysia also recorded faster growth. Thailand’s own manufacturing PMI reached 54.8, its strongest reading since December 2025, reinforcing the region’s relative resilience. However, companies across Asia continue to report difficulties obtaining inputs and managing higher transport and production costs. Reuters
The changing manufacturing landscape is creating opportunities for regional supply-chain relocation. Thailand Business News previously examined this structural shift in its analysis of ASEAN overtaking China in manufacturing foreign direct investment and its report on how US electronics tariff exemptions could reshape Southeast Asian manufacturing. Both developments underline the region’s growing importance as companies diversify production bases and reduce dependence on concentrated supply chains.
The risks remain significant. The prolonged Middle East conflict is raising energy and food costs, while shipping bottlenecks are delaying deliveries and increasing input prices. The International Monetary Fund expects Asian economic growth to moderate from 5.0% in 2025 to 4.8% in 2026 and 4.4% in 2027, highlighting the possibility that external shocks and a correction in AI-related investment could weaken the regional outlook.
Why it matters: Southeast Asia’s improving manufacturing performance strengthens its appeal as an alternative production base for international companies. Thailand could benefit from this shift, but sustaining investment will require better infrastructure, skilled labour, reliable energy supplies and stronger integration of domestic suppliers into regional value chains.
Editorial assessment: Thailand’s manufacturing data provide a positive domestic signal, but the wider Asian picture is becoming more complicated. The region’s next growth phase will depend on whether Southeast Asia can convert stronger factory orders and supply-chain diversification into sustained investment, higher productivity and more resilient exports.
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