China's vast manufacturing sector returned to growth in December for the first time in eight months, according to official surveys released on Wednesday, 31 December 2025. The unexpected uptick was fuelled by a seasonal rush of orders ahead of the New Year holidays and a slight easing of trade pressures.
Key Indicators Show Marginal Growth
The closely watched official Purchasing Managers' Index (PMI) for manufacturing rose to 50.1 in December, the National Bureau of Statistics reported. This figure is just above the critical 50-point mark that separates expansion from contraction. A separate private sector survey by the Chinese firm RatingDog corroborated the finding, also registering a reading of 50.1.
Analysts suggest the better-than-expected data reflects a combination of factors. Manufacturers ramped up production ahead of holiday closures, with the Lunar New Year falling in mid-February 2026. Furthermore, an extended truce in trade tensions with the United States provided some relief. The official PMI for high-tech manufacturing showed a more robust expansion, standing at 52.5 in December, a significant increase of 2.4 percentage points from November.
Underlying Weaknesses and Sectoral Divergence
Despite the headline return to growth, the report revealed persistent weaknesses beneath the surface. The RatingDog survey noted that while overall orders increased, new export sales declined slightly and hiring weakened. Yao Yu, founder of RatingDog, cautioned that the improvement was "marginal," driven by promotions and new product launches, with its sustainability in doubt.
The recovery was also unevenly distributed. While large manufacturers increased output, activity for small and mid-sized enterprises (SMEs)—which provide the majority of China's employment—remained in contractionary territory. The report also highlighted that consumer-facing sectors struggled, with conditions for retailers and restaurants deteriorating as spending softened.
Persistent Headwinds Cloud the Outlook
Economists warn that December's upturn may be short-lived. Julian Evans-Pritchard of Capital Economics suggested the increase might be linked to a slight rise in government spending rather than a fundamental strengthening of demand. "The big picture is that the structural headwinds from the property downturn and industrial overcapacity are set to persist in 2026," he stated, adding there appears limited appetite for large-scale stimulus.
The world's second-largest economy continues to grapple with a prolonged property sector slump and damaging price wars in industries like automaking due to excess capacity. The RatingDog report also pointed to higher raw material costs, particularly for metals, squeezing company profit margins and prompting exporters to raise prices for the first time in three months.
