China's Dec Manufacturing PMI Falls to 49.3%, Expansion Proves Short-Lived as Activity Returns to Contraction

By AI Insights

2026-02-04

According to the latest data from the National Bureau of Statistics, China's manufacturing Purchasing Managers' Index (PMI) for December retreated to 49.3%, a decline of 0.8 percentage points from last month's expansionary figure of 50.1%. This correction not only erased the brief gains seen in November but also highlights that the manufacturing sector still faces significant downward pressure as of the end of 2025, with the foundation for recovery not yet solid.

Detailed data indicates that weakness on the demand side was the main drag. While November benefited from seasonal rush orders and policy effects, the new orders index turned downward in December, returning to contraction territory. Meanwhile, although the production index maintained relative resilience, signs of slowing growth have emerged. The widening gap between supply and demand reflects that enterprises remain cautious regarding inventory destocking and order visibility.

Market analysis suggests the primary cause for this decline is the persisting structural contradiction of "insufficient effective demand." Economists from institutions such as Pinpoint Asset Management generally believe that while exports have played a supporting role over the past year, adjustments in the real estate market and the restoration of domestic consumer confidence still require time. This has resulted in manufacturing sentiment exhibiting "pulse-like" volatility rather than a trend-based recovery.

Looking ahead, short-term factory activity in January and February is expected to be impacted by seasonal shutdowns and workers returning home due to the upcoming Lunar New Year. Data volatility may intensify further, and the PMI is likely to continue hovering at low levels. In the medium to long term, market focus will center on whether stronger fiscal stimulus measures will be unveiled around the "Two Sessions" next March to hedge against weak domestic demand and stabilize manufacturing investment confidence.

Related References:

Hashtags

Market Spotlight