The manufacturing purchasing managers' index (PMI) came in at 49.8, narrowly below the value of 50 separating contraction from expansion, according to the National Bureau of Statistics (NBS).
Still, the reading beat the forecast of 49.6 in a Bloomberg survey of economists and was the highest since March.
But it extended a streak of contraction that began in April, as factories across the manufacturing powerhouse contend with turbulence from the ongoing US-China trade war.
"Overall economic output expansion in the country accelerated slightly" during the month, said NBS statistician Huo Lihui in a statement.
The figures come just before the start of the country's "Golden Week" National Day holiday, a period that usually sees slower factory activity.
Official data also showed Tuesday that the non-manufacturing PMI, which measures activity in sectors including services and construction, fell to 50.0 in September from 50.3 in August.
That was short of a Bloomberg forecast of 50.2 and was the lowest since November.
"Economic momentum is weak in the third quarter," Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note.
"Export activities have been surprisingly resilient so far this year and helped to partly offset the weak domestic demand."
Consumer prices in China fell in August at their fastest rate for six months, a sign of continuing struggles on that front.
"Since the GDP growth was above five percent in the first half, the government may tolerate the slowdown in the second half as long as it doesn't jeopardise the full-year growth target of five percent," Zhang wrote.
The recent slump comes as Beijing and Washington work to negotiate a deal to end their bruising trade war, with the world's top two economies extending a truce on most reciprocal duties to November 10.
Stocks rise, gold hits record as rate cuts and shutdown loom
Hong Kong (AFP) Sept 30, 2025 -
Equities rallied for a second day and gold hit another record Tuesday on growing Federal Reserve interest rate optimism, though traders were preparing for a possible US government shutdown that could affect the release of key economic data.
A string of closely watched indicators has recently supported investor expectations that the US central bank will lower borrowing costs twice more this year, having done so this month for the first time since December.
And this week has readings on the labour market lined up -- on job openings, private hiring and non-farm payrolls -- with forecasters predicting they will show the labour market continuing to slow, giving Fed officials room to loosen monetary policy.
However, there are concerns that the failure of Republicans and Democrats to agree to keep funding the government could mean some figures could be postponed.
Congressional leaders from both sides met President Trump Monday in a bid to find a breakthrough before a midnight Tuesday deadline, but top Senate Democrat Chuck Schumer told reporters afterwards that "large differences" remained.
Vice President JD Vance accused the Democrats of putting "a gun to the American people's head" with their funding demands, adding that "I think we're headed to a shutdown because the Democrats won't do the right thing".
While shutdowns are not usually painful, Neil Wilson at Saxo markets remained cautious.
"Usually, markets ignore shutdowns -- most last only a few days and investors seem to take a long-term view of the situation, and the short duration of most incidents has little impact on company profits. The average length of shutdowns is eight days," he wrote.
However, he warned: "It could be different this time.
"Deep political divisions could see this drag on. A longer shutdown could have serious consequences for stocks. In the 35-day shutdown of 2018-2019 the S&P 500 fell 14 percent."
He also pointed to the White House threatening mass firings, extending a recent widespread federal cull, while recent changes to economic policy added to uncertainty and raised the prospect of a potential recession.
Still, stock markets rose again in Asia.
Hong Kong, Shanghai, Sydney, Taipei, Singapore, Manila and Wellington all climbed, though Tokyo, Jakarta and Seoul inched down.
The prospect of a shutdown and expectations for rate cuts helped push gold to yet another peak just shy of $3,852, with speculation whirling that it could soon hit $4,000, having piled on almost 50 percent since the turn of the year.
"In trading rooms, gold is no longer just a hedge; it's become the star performer, the undisputed heavyweight," said SPI Asset Management's Stephen Innes.
"Every desk is watching because when gold is surging, it tends to reveal more about political and policy anxiety than about jewelry demand."
In company news, the international spin-off of China's biggest miner Zijin Mining Group rocketed higher on its Hong Kong debut.
Zijin Gold International surged as much as 66 percent in early trade, having raised more than $3 billion in an initial public offering that came as gold companies see healthy rallies on the back of increased demand for the precious metal.
Oil prices extended Monday's three percent plunge on fears about a glut amid talk of OPEC+ hiking output again in November.
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