Manufacturing activity contracts for a second consecutive month while services remain weak; economists warn first-quarter growth may falter without fresh stimulus
China’s manufacturing sector contracted for the second straight month in February, an official survey showed on Wednesday, highlighting the ongoing struggles of factory owners amid weak domestic demand and tepid investment, despite resilient export performance.
The National Bureau of Statistics’ official purchasing managers’ index (PMI) fell to 49 in February from 49.3 in January, marking a four-month low. The figure remained below the 50 threshold that separates expansion from contraction, and came in slightly below the median forecast of 49.1 in a Reuters poll.
The non-manufacturing PMI, which tracks services and construction, inched up to 49.5 from 49.4 in January, indicating that the broader economy remains under pressure.
Economists noted that while the survey is seasonally adjusted to account for factory shutdowns during the Lunar New Year—this year lasting a record nine days from February 15 to 23—widespread closures may still have skewed the results.
Policymakers had refrained from introducing fresh stimulus in the final quarter of 2025, confident that the world’s second-largest economy could meet its official growth target of around 5 per cent, supported by record exports and efforts to diversify trade away from the United States amid lingering tariff pressures from former President Donald Trump.
However, analysts expect growth to remain subdued in the first quarter of 2026 without further policy support. Targeted interest-rate cuts and reductions in banks’ reserve requirements are unlikely to significantly boost growth, after similar measures provided only limited gains in the post-COVID period.
China’s Premier Li Qiang is expected to unveil the official 2026 growth target on Thursday, at the opening of the annual session of the National People’s Congress. Economists polled by Reuters in January forecast growth slowing to 4.5 per cent this year, with a similar pace expected in 2027.
Last week, the Politburo, the Communist Party’s top decision-making body, pledged more proactive and effective economic policies, emphasizing efforts to stabilize employment and strengthen domestic demand. Analysts expect fresh measures to curb overcapacity and provide support to vulnerable sectors when Premier Li presents the government’s work report and outlines the next five-year plan.
With inputs from agencies.
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