Caixin PMI Rises to 50.3 Extending Expansion; Recovery in Domestic Demand Offsets Tariff Headwinds

By AI Insights

2026-02-04

Latest data published by Caixin Media shows that the China General Manufacturing Purchasing Managers' Index (PMI) recorded 50.3 in December 2025, an increase of 0.2 percentage points from 50.1 in November. This not only extends the rebound trend following a brief contraction in October but also marks a new high for the past three months. This data indicates that despite a challenging external environment, China's manufacturing sector maintained a trend of moderate expansion at the end of 2025, suggesting that the previous combination of policy measures is gradually transmitting to the real economy, assisting enterprises in withstanding external shocks.

Observing key sub-indices, although official data did not release specific numerical values for the sub-items, market signs indicate that the "New Orders" and "Output" indices were likely the main forces supporting this rebound. According to recent industry research, benefiting from the peak domestic consumption season and the continuation of "trade-in" policies, domestic demand orders have warmed up. However, the "Employment" sub-index is expected to remain in contraction territory, reflecting that enterprises, under profit margin pressure, remain cautious about expanding headcount. Furthermore, affected by the Red Sea crisis and supply chain restructuring, suppliers' delivery times may have lengthened slightly.

In an in-depth attribution analysis, the resilience of the manufacturing sector's business climate primarily stems from the effect of "internal and external hedging." According to analyses by institutions such as MERICS and Interact Analysis, although the new round of US tariffs (the Trump 2.0 effect) led to a significant decline in exports to the US in the fourth quarter of 2025, China's exports to ASEAN, Europe, and Africa reached new highs, effectively filling the gap. Meanwhile, Bloomberg pointed out that the fiscal stimulus signals released by Chinese policymakers at the end of the year successfully stabilized market confidence, preventing the manufacturing sector from stalling due to external demand volatility.

Looking ahead, in the short term (1-2 months), affected by the Lunar New Year holiday effect, factory shutdowns may cause seasonal fluctuations in the data for January and February. Moreover, the specific enforcement intensity of tariffs after the new Trump administration takes office will be the biggest risk point. In the medium term (3-6 months), as 2026 formally marks the opening year of the "15th Five-Year Plan," the policy focus will shift from simple scale expansion to "capacity upgrading" and "technological self-reliance." High-tech manufacturing is expected to become the engine for the new round of growth, but traditional manufacturing will still need to face the challenges of destocking and profit compression.

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