China Manufacturing Activity Expands for First Time Since March, Beating Forecasts

Beijing: China’s manufacturing sector returned to expansion in December for the first time in nine months, offering a cautiously positive signal for the world’s second-largest economy as factory activity exceeded market expectations.

Official data released on Tuesday showed the country’s manufacturing purchasing managers’ index (PMI) rose to 50.1 in December, up from 49.2 in November and above the 49.2 median forecast in a Reuters survey of economists. A reading above 50 indicates expansion, while anything below signals contraction.

The improvement marks the first expansion since March and suggests stabilising demand after months of subdued activity driven by weak domestic consumption and a prolonged property downturn.

China’s composite PMI, which tracks activity across both manufacturing and services, increased to 50.7 from 49.7, pointing to broader improvement across the economy. Meanwhile, the non-manufacturing PMI, covering services and construction, rose to 50.2 from 49.5 in November.

According to National Bureau of Statistics of China, the recovery was supported by stronger new orders. Huo Lihui, chief statistician at the bureau, said December data showed a “significant expansion” in both production and demand within the manufacturing sector.

Private data confirms recovery

Private-sector surveys echoed the official figures. A separate PMI compiled by independent research firm RatingDog showed manufacturing activity rising to 50.1 in December, up from 49.9 in November and beating expectations.

Yao Yu, founder of RatingDog, said the data confirmed that manufacturing had returned to expansion, noting that total new orders grew for a seventh consecutive month. He attributed the improvement to domestic product launches and ongoing business development, which supported higher output.

However, Yao cautioned that while firms remain broadly confident about 2026, overall optimism has softened and remains below historical averages.

Large firms lead, smaller businesses lag

Data from the statistics bureau showed that the rebound was driven primarily by large enterprises. The PMI for large manufacturers climbed to 50.8, up 1.5 percentage points from November.

By contrast, activity among smaller firms remained under pressure. The PMI for medium-sized enterprises edged up to 49.8, while the index for small enterprises fell to 48.6, highlighting uneven recovery across the sector.

Market reaction mixed

Financial markets showed a mixed response to the data. Hong Kong’s Hang Seng Index declined 0.83%, while mainland China’s CSI 300 rose 0.33%.

The release followed a decision by the People’s Bank of China earlier this week to keep its key loan prime rates unchanged, despite ongoing weakness in the property sector and softer-than-expected economic indicators.

Recent data showed November retail sales and industrial output missing forecasts, while fixed-asset investment also remained under pressure.

Still, Hao Zhou, chief economist at Guotai Junan International, described the PMI reading as a “very positive surprise” for markets.

He said the data suggests the economy is moving in the right direction, even as concerns persist over property, equity markets, and consumer demand.