Official data: China factory activity snaps eight-month slump boosted by pre-holiday orders

China’s factory activity edged back into expansion in December, snapping an eight-month contraction streak as pre-holiday restocking offered a temporary boost to manufacturing, easing near-term pressure on policymakers seeking to stabilise the $19 trillion economy without intensifying deflationary risks.

The official manufacturing purchasing managers’ index (PMI) rose to 50.1 in December from 49.2 in November, data from the National Bureau of Statistics showed, returning marginally above the 50-point threshold that separates expansion from contraction.

Momentum was most evident in demand indicators. The new orders sub-index climbed to 50.8 from 49.2, re-entering expansionary territory for the first time since the first half of 2025, suggesting a short-term improvement in factory workloads.

Analysts largely attributed the rebound to seasonal stockpiling ahead of the year-end holiday period, with sectors tied to food and beverage production among the main beneficiaries. Many, however, cautioned that the uptick was unlikely to signal a sustained recovery, pointing to the absence of a broad-based improvement in underlying demand.

Activity beyond the manufacturing sector also showed tentative signs of stabilisation. The non-manufacturing PMI, covering construction and services, rose to 50.2 in December from 49.5 a month earlier, moving back into expansionary territory.

Despite the headline improvement, structural headwinds remain. Economists warn that attempts to revive factory output without stronger support for household consumption could reinforce deflationary pressures. Separate data showed profits at Chinese industrial firms fell 13.1% year on year in November, the steepest decline in more than a year, highlighting persistent demand weakness as a slowing global economy continues to weigh on exports.

Written by: Farid Muzaffar