Manufacturing resilient despite lower PMI figure

China's manufacturing sector displayed resilience in January, with production and high-tech industries remaining in expansion mode, even as overall factory activity slipped back into contraction zone amid seasonal factors, official data showed.

Analysts said the figures indicated a stabilizing economy and renewed industrial momentum. Supply-side momentum was holding firm and innovation-driven segments were continuing to act as key stabilizers, even as policymakers stepped up efforts to secure a solid growth footing for 2026.

Looking ahead, analysts expect near-term factory activity to face further volatility around the Spring Festival holiday due to fewer working days. However, they also see policy support and industrial upgrading being key anchors for growth this year.

With structural fiscal and monetary measures already being deployed and further easing — including interest rate and reserve requirement ratio cuts — possible, policymakers have ample room to navigate weak domestic demand, structural transition and external uncertainty in 2026, they added.

The official purchasing managers' index for the manufacturing sector fell to 49.3 in January, down from 50.1 in December, indicating a mild contraction as it slipped below the 50-point mark that separates expansion from contraction, data from the National Bureau of Statistics showed on Saturday.

Despite the overall contraction, key segments of the manufacturing sector continued to show resilience. The PMI for high-tech manufacturing came in at 52 in January, remaining at or above 52 for two consecutive months. The PMI for equipment manufacturing stood at 50.1, signaling expansion.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said the slip in manufacturing PMI figures was mainly due to seasonal factors, base effects and insufficient domestic demand.

Wang added that high-tech sectors as well as manufacturing output showed resilience, supported by robust exports in January linked to strong demand for products like chips.

NBS data showed that the subindex for production came in at 50.6 in January, while the subindex for new orders stood at 49.2.

Notably, the subindex tracking manufacturers' expectations for production and business operations reached 52.6 in January, remaining above the threshold and pointing to relatively strong confidence among manufacturers.

Wang said that going forward, manufacturing sentiment will mainly be influenced by changes in export growth, trends in the property market, and the timing and intensity of growth-supporting policies.

"We believe that after the rollout of the structural policy package earlier this year, China will likely cut RRR and lower interest rates in the second quarter, while fiscal policy will step up efforts to boost consumption and investment," he said, adding that the pace of rolling out growth-stabilizing policies this year may be accelerated.

Xiong Yuan, chief economist at Guosheng Securities, said that as 2026 marks the opening year of China's 15th Five-Year Plan (2026-30) period, securing a strong start will be among key priorities of policymakers. "Fiscal policy is likely to be front-loaded, with the first group of trade-in subsidies already allocated," he said.

According to Xiong, other measures may include faster fiscal spending, continued subsidies for consumer loans, and accelerated issuance of local government special bonds. "The central bank may also lower interest rates and cut RRR in the first quarter, while major projects could be brought forward to start construction earlier," he added.

Foreign companies are also betting on the resilience of the world's second-largest economy.

Brian McNamara, CEO of British consumer health company Haleon, said: "China is central to our ambition to reach 1 billion more consumers by 2030. An aging population, a rising middle-income group and greater focus on wellness are fueling demand.

"We're backing that with significant investment, including our 700 million pound ($960 million) acquisition of the Tianjin TSKF Pharmaceutical joint venture and reinvestment in our Suzhou manufacturing plant to better serve consumers in this dynamic market," McNamara added.

ouyangshijia@chinadaily.com.cn