Manufacturing PMI Signals Growth
China's factory activity expanded in December 2025, as the official Purchasing Managers' Index (PMI) for the manufacturing sector rose to 50.1. This figure, released by the National Bureau of Statistics (NBS) on Wednesday, December 31, 2025, indicates a return to growth after several months of contraction. The December reading was an increase from 49.2 in November, surpassing market expectations. A PMI reading above 50 signifies expansion, while a reading below 50 indicates contraction.
The S&P Global/Rating Dog Purchasing Managers' Index also reported a rise to 50.1 in December, up from 49.9 in November, signaling a fractional improvement in operating conditions and marking the fourth month of improvement in the past five months.
Key Drivers: Domestic Demand and Production
The upturn in manufacturing activity was primarily fueled by a significant rebound in domestic demand and production. The sub-index for new orders climbed to 50.8 in December, up 1.6 percentage points from the previous month, entering expansionary territory for the first time since the first half of 2025.
Manufacturing output also returned to growth, with the sub-index for production standing at 51.7, an increase of 1.7 percentage points from November. Huo Lihui, a chief statistician with the NBS, noted that 'Both production and demand rebounded significantly,' attributing some of the boost to stockpiling ahead of the holidays.
Specific sectors showed strong performance, with the PMI for high-tech manufacturing reaching 52.5, up 2.4 percentage points month-on-month. The PMIs for both equipment manufacturing and the consumer goods industry also reached 50.4.
Lingering Challenges: Exports and Employment
Despite the overall improvement, the recovery remains uneven. New export orders continued to decline for the second time in three months, reflecting persistent subdued external demand. The sub-index for new export orders registered 49 in December, a slight improvement from 47.6 in November, but still in contraction territory.
Employment in the manufacturing sector continued its contraction for the second consecutive month. RatingDog's founder, Yao Yu, commented that while the manufacturing sector regained growth, 'the improvement was marginal.' Analysts like Julian Evans-Pritchard of Capital Economics cautioned that the upturn might be short-lived due to 'structural headwinds from the property downturn and industrial overcapacity.'
Broader Economic Context
Beyond manufacturing, China's non-manufacturing PMI also returned to expansion, rising to 50.2 in December, up 0.7 percentage points from the previous month. The composite PMI output index, which reflects changes across both manufacturing and non-manufacturing sectors, stood at 50.7.
The improved readings are partly attributed to easing trade tensions with the U.S. and manufacturers increasing production in anticipation of the upcoming New Year holidays. President Xi Jinping has pledged to promote 'high-quality development' and implement 'more positive macroeconomic policies' to ensure stability.
5 Comments
Mariposa
Domestic demand is surging. This is a powerful rebound for manufacturing.
Muchacha
Easing trade tensions certainly contribute to this positive shift, but without addressing the underlying issues of industrial overcapacity, this expansion might struggle to gain significant momentum in the coming months.
Comandante
High-tech leading the way! A clear sign of strategic success.
Bermudez
The rebound in domestic demand is encouraging, showing internal strength. However, analysts are right to caution about structural headwinds like the property market downturn that could limit long-term expansion.
Coccinella
Exports are still struggling. This 'recovery' is on shaky ground.