China January official manufacturing PMI drops to 49.3
China’s factory activity paused in January as weak domestic demand dragged down output at the start of the new year.
The official purchasing managers’ index (PMI) fell below the 50 points that separate growth from contraction, falling from 50.1 in December to 49.3 in January.
It missed the 50.0 estimate in a Reuters analyst survey.
New orders and new export orders sub-indices also decreased, falling from 50.8 in December to 49.2 and from 49.0 in December to 47.8.
Non-manufacturing PMI, which includes services and construction, fell from 50.2 to 49.4 in December, falling to its lowest level since December 2022.
Huo Lihui, a statistician with the National Bureau of Statistics, said in a note that some types of manufacturers traditionally enter a slow period in January and market demand remains weak.
The world’s second-largest economy hit the government’s official growth target of five percent last year, boosted by strong exports that defied the pressure of US President Donald Trump’s tariff attack.
But the headline figure masked deep imbalances in the economy. Retail sales weakened further in the latest quarter, pushing GDP growth in the fourth quarter to a three-year low.
As the decline in domestic demand continues, signs of unease are increasing among policymakers.
The government has bootstrapped 62.5 billion yuan (US$12.92 billion) from ultra-long special treasury bond funds to support its plan, which offers subsidies to consumers in lieu of products ranging from home appliances to smartphones.
Earlier this month, the central bank announced sector-specific interest rate cuts, signaling there is room to further reduce banks’ cash reserve requirements and make broader interest rate cuts this year.
While authorities seek to encourage household spending on goods, they are also turning to measures aimed at increasing consumption of services in order to absorb the production of the manufacturing sector.
Still, analysts remain skeptical about how much these steps can help stabilize growth.
“Beijing will need to do much more in the coming months to lift the annual GDP growth rate above 4.5 percent in 2026. As Beijing runs out of easily applicable policy tools, policymakers may need more time to prepare more comprehensive measures,” Nomura China Chief Economist Ting Lu said in a note.
Beijing has vowed to make boosting domestic demand its top priority this year as it sharpens its focus on building self-reliance in technology to reduce vulnerability to foreign trade blockades and protectionist measures.
At a recent seminar attended by senior government officials, President Xi Jinping called for “vigorous development of advanced manufacturing” and promised to “make domestic demand the main driver of economic growth.”
It has been reported that China will likely set its official growth target this year between 4.5 percent and 5 percent, as policymakers adopt a cautious approach to stimulus with a stock market bubble on their minds, South China Morning Post reported.
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