China’s manufacturing sector shows signs of contraction for the second consecutive month, as indicated by a survey of 27 economists. According to the released data, the Purchasing Managers’ Index (PMI) is likely to drop to 49.1 points in February, down from 49.3 in January. This level is below the 50-point threshold that separates growth from contraction.
This is reported by Finway
Reasons for the Decline in China’s Industry
Factory owners in China are facing difficulties in making profits due to weak domestic demand and declining investments, despite stable exports. Although the PMI index briefly reached a positive mark of 50.1 in December after eight months of decline, the indicator remained in negative territory for most of last year.
It is worth noting that the survey results have been adjusted for seasonal factors, including production stoppages during the Lunar New Year celebrations from February 15 to 23. However, even these adjustments do not fully compensate for the impact of widespread business closures during this period.
“Experts predict that the official Purchasing Managers’ Index (PMI) will fall to 49.1 in February from 49.3 in January, which is below the 50-point threshold that separates growth from contraction.”
Expectations and Political Moves from Beijing
In the fourth quarter of 2025, the Chinese government refrained from implementing new stimulus measures, confident in achieving the official economic growth target of around 5% through record exports. However, economists forecast that growth rates will remain weak in the first quarter of 2026 without additional support from the government.
It is expected that Chinese Premier Li Qiang will announce a new growth target for 2026 during the opening of the annual session of the national legislature on March 5. Most experts believe this target will slow to 4.5% and remain at this level in 2027.
Additionally, China is preparing new initiatives to reduce excess production capacity. In particular, senior economist at the Economist Intelligence Unit, Xun Tianchen, predicts a gradual reduction in industrial subsidies and the implementation of minimum prices in various sectors of the economy.