China’s manufacturing sector shrank for the second consecutive month in February, an official survey revealed Wednesday. Factory owners continue facing challenges from subdued domestic demand and lackluster investment, even as exports hold strong.
PMI Signals Ongoing Contraction
The National Bureau of Statistics’ purchasing managers’ index (PMI) declined to 49 in February from 49.3 in January, hitting a four-month low. Staying below the 50 mark that divides growth from shrinkage, the reading fell short of economists’ median projection of 49.1.
The non-manufacturing PMI, covering services and construction, edged higher to 49.5 from 49.4 in January, yet the overall economy faces persistent strain.
Lunar New Year Impact and Adjustments
Economists highlight that the survey accounts for seasonal factors, including extended factory closures during the Lunar New Year holiday, which spanned a record nine days from February 15 to 23. Still, broad shutdowns likely influenced the outcomes.
Policy Stance and Growth Prospects
Authorities avoided new stimulus measures in late 2025, banking on roughly 5% growth fueled by robust exports and trade shifts away from the United States amid ongoing tariff tensions from former President Donald Trump.
Analysts anticipate muted expansion in the first quarter of 2026 absent additional support. Targeted interest rate reductions and lower bank reserve requirements delivered only modest results after the COVID era, offering little expectation for major lifts now.
Premier Li Qiang will disclose the official 2026 growth target Thursday, kicking off the National People’s Congress annual session. Economists project a slowdown to 4.5% this year, with a comparable rate in 2027.
Recent Policy Commitments
Last week, the Politburo committed to more proactive economic steps, focusing on employment stability and bolstering domestic demand. Observers anticipate initiatives to address overcapacity and aid struggling industries when Premier Li delivers the government work report and five-year plan outline.
