China's Manufacturing Momentum Stalls in January, Slipping Back into Contraction
China's manufacturing sector lost momentum at the start of the new year, with a key activity gauge slipping back into contraction territory, according to official data released Saturday. The reading fell short of analyst expectations, signaling ongoing headwinds for the world's second-largest economy.
The National Bureau of Statistics (NBS) reported that the official Manufacturing Purchasing Managers' Index (PMI) dipped to 49.3 in January, down from 50.1 in December. A figure below 50 indicates a contraction in activity. The result was notably weaker than the 50.1 forecast in a Bloomberg survey of economists.
"The data primarily reflects insufficient effective market demand," NBS statistician Huo Lihui stated, also attributing the decline to a "traditional off-season" for some industries.
This retreat ends a short-lived recovery in December, which had briefly broken a prolonged negative streak dating back to April of last year. The setback highlights the fragility of domestic demand, which continues to lag behind a strong export performance that has been a central pillar of growth.
"The weakness is clearly driven by soft domestic demand," noted Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management. "Economic activity may soften in the first quarter." Zhang emphasized that while exports were last year's growth engine, "their sustainability is very important for the growth outlook."
The broader economic context remains complex. China recently reported its economy grew 5% in 2025, one of its slowest paces in decades. A protracted property sector crisis continues to dampen consumer and investor confidence, a situation exacerbated by long-term demographic shifts towards an aging and shrinking population.
Policymakers have pledged "forceful" measures to stimulate demand. Market participants are looking ahead to March, when the annual legislative session is expected to unveil key policy directions and set the year's growth target, likely around 5% again, alongside details of the new five-year plan.
Market Voices: Analysts Weigh In
Michael Chen, Portfolio Manager, Hong Kong: "This is a predictable seasonal blip, but it reinforces the need for targeted stimulus. The focus should remain on high-quality exports and strategic sectors. The Q1 softness was anticipated."
Sarah Wilkinson, Emerging Markets Strategist, London: "The data confirms the recovery isn't linear. The real story is the deepening divergence between external and internal strength. Until the property market finds a floor and household confidence rebounds, these fluctuations will persist."
David Miller, Independent Economic Commentator: "It's the same story month after month. The 5% growth mask is slipping. This isn't just an 'off-season'; it's a structural slowdown. The property debt bomb and demographic decline are not seasonal—they're existential. Where is the bold consumption stimulus?"
Li Jia, Economics Professor, Beijing University: "We must view this within the framework of economic transition. Short-term volatility is inevitable as the economy weans off property-driven growth. The strong trade surplus provides a crucial buffer, allowing for more calibrated, reform-focused policy measures."