Poll finds China's factory activity likely to stall in January

A poll of 25 economists projects China's official manufacturing purchasing managers' index (PMI) will slip to roughly 50.0 in January from 50.1 in December, signaling a near-stall in factory activity at the start of 2026. The forecast, based on the economists' consensus, frames a fragile industrial sector still contending with sluggish domestic demand even after December's unexpected rebound that ended an eight-month contraction streak.

The private-sector RatingDog survey, which covers about 650 manufacturers and collects responses in the second half of each month, is expected to show a slightly stronger picture with a January reading of 50.3, up from 50.1 in December. That private index, compiled by S&P Global and RatingDog, typically skews toward export-oriented producers and often diverges from the official PMI, which surveys a larger sample of more than 3,000 companies at month-end. The private reading is scheduled for release on February 2.

The recent data sequence highlights mixed momentum. Official gauges recorded a surprise recovery in December to 50.1 after months of contraction, yet underlying activity metrics remained patchy in November: industrial output rose 4.8% year-on-year in November, the weakest pace since August 2024, while retail sales expanded just 1.3%, their weakest since late 2022. Private survey data showed the RatingDog index sliding from 51.2 in September to 50.6 in October and 49.9 in November, when analysts said new orders had nearly stalled. “Manufacturing production growth came to a halt as new orders nearly stalled in November,” S&P Global and RatingDog observed.

Seasonal timing around the Lunar New Year is an added complicating factor this year. With the holiday falling unusually late in February, analysts note factories may have concentrated activity early in the year. “With the holiday landing in late February, many migrant workers may not return to their jobs until mid-March, prompting factories to front-load their manufacturing activity to the beginning of the year,” Mizuho Securities said, warning that activity could face renewed pressure once holiday travel intensifies.

Industry participants signaled cost-cutting and caution. RatingDog founder Yao Yu said manufacturers were reducing payrolls and input purchasing and tightening inventory management, and he expected a “weak expansion” in factory activity around year-end as policymakers sought to hit an annual growth target of “around 5%.”

The near-term outlook leaves limited room for complacency. Policy support is likely to be needed to sustain any broad recovery in domestic demand, and some economists caution that sporadic stimulus will not be enough to offset structural drags such as a drawn-out property-sector crisis and fading consumer subsidies. “Policy support should help drive a partial recovery in the coming months, but this probably won't avert China's growth from remaining weak across 2026 as a whole,” said Zichun Huang, an economist at Capital Economics.

For markets, a flat-to-weak PMI reading would temper expectations for robust investment and household consumption, keeping pressure on equities tied to industrial and domestic cyclical demand and complicating Beijing's policy calculus between targeted fiscal measures and monetary accommodation. The exchange rate sits near $1 = 6.9489 yuan, a reminder that external demand will remain an important axis for growth even as domestic demand struggles.