China’s factories return to growth after eight-month slump

China’s factories returned to growth in December for the first time in eight months, offering a rare bright spot for the world’s second-largest economy as policymakers grapple with slowing demand and deepening structural strains.

Factory activity expanded for the final month of the year as orders picked up ahead of holidays and builders rushed to finish projects, according to surveys released Wednesday.

The official purchasing managers index or PMI for manufacturing, a monthly survey of companies, rose to 50.1 this month, the National Bureau of Statistics reported. That was just above the 50 cut off for expansion versus contraction on a scale up to 100. Another, private sector, survey also was at 50.1 for December.

The better-than-expected readings partly reflect easing pressure due to an extended truce in trade tensions with the US.

They also suggest manufacturers ramped up production ahead of New Year holidays, when many companies close for days. China’s Lunar New Year falls in mid-February this year.

The world's second largest economy is forecast to grow at a pace just below the official target of about 5% this year, supported by strong activity in high-tech industries and exports. The official PMI for high-tech manufacturing stood at 52.5 in December, up 2.4% from the previous month.

The report said the PMIs for both equipment manufacturing and the consumer goods industry reached 50.4.

The separate report by RatingDog, a Chinese credit research and analysis company based in the southern city of Shenzhen, said that despite an increase in overall orders, new export sales fell slightly and hiring weakened.

“Overall, the manufacturing sector regained growth at the end of 2025,” RatingDog's founder Yao Yu said in a statement.

“However, the improvement was marginal, with the impact of promotions and new products appearing impulse-driven and their sustainability requiring observation.”

The National Statistic Bureau said the PMI measures for food, textiles, clothing and electronics were above a relatively strong 53.

However, while large manufacturers increased their output, factory activity for the small and mid-sized enterprises that account for the lion’s share of employment in China remained in contractionary territory.

As consumers cut back on spending, conditions for retailers and restaurants also deteriorated, the report said.

Some economists believe China's economy is growing more slowly than official figures suggest. Its leaders are grappling with long-term challenges including a years-long slump in the country's property sector and excess capacity in many industries, including automaking, that has led to damaging price wars.

Higher costs for raw materials, especially for metals, has put pressure on company profit margins, the RatingDog report said. It noted that exporters had raised prices for the first time in three months to help offset those higher costs.

The upturn in activity may be short-lived as it appears to be helped by a slight increase in government spending, Julian Evans-Pritchard of Capital Economics said in a report.

“The big picture is that the structural headwinds from the property downturn and industrial overcapacity are set to persist in 2026 and there appears to be limited appetite among policymakers for a big increase in demand-side stimulus,” he said.