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China’s manufacturing activities shrank to a five-month low in January, with the official Manufacturing Purchasing Managers’ Index (PMI) falling to 49.1 from December’s 50.1, according to the National Bureau of Statistics (NBS). 

While manufacturers note the seasonal nature of the decline, the drop below the critical 50-point threshold indicating contraction, underscores persistent vulnerabilities in the sector. Optimism fuelled by a strong fourth-quarter performance in 2024, including an 11% year-on-year industrial profit increase in December, now appears to be tempered by waning demand and fragile recovery momentum.

A closer look at the PMI data reveals troubling signs: new domestic orders slid by 1.8 percentage points to 49.2, while export orders declined even further, plunging 1.9 points to 46.4, highlighting weakening demand both at home and abroad. 

The non-manufacturing PMI, encompassing services and construction, also cooled to 50.2, down from 52.2 in December, reflecting broader economic stagnation.

Policymakers have pledged additional stimulus measures in 2025, but concerns persist over their effectiveness. Analysts warn that a continued focus on industrial upgrades and infrastructure spending, rather than measures to boost household consumption, risks exacerbating overcapacity in factories, suppressing demand, and deepening deflationary pressures.

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Written by: Derek Yong

Country
China