China's factory activity contracts for a second month
[March 04, 2026] By
CHAN HO-HIM
HONG KONG (AP) — China’s factory activity shrank for a second month in
February, though lower U.S. tariffs could bring about a small boost in
the coming weeks.
The official manufacturing purchasing managers index, or PMI, slipped to
49 from 49.3 in January, a four-month low, the National Bureau of
Statistics reported Wednesday. The figure from its monthly survey of
factory managers is measured on a scale of 0 to 100 and indicates
contraction when it is below 50.
December’s manufacturing PMI reading of 50.1 broke China’s eight
consecutive months of contraction, but its recent return to negative
territory signals more weakness in manufacturing especially under
sluggish domestic consumption and demand.
Huo Lihui, a National Bureau of Statistics chief statistician,
attributed the weaker data in a statement to seasonal factors including
the Lunar New Year holiday, which lasted for nine days in mid-February
this year.
A separate private sector PMI survey by Chinese credit research and
analysis company RatingDog also released Wednesday appeared more upbeat,
with a February PMI reading of 52.1, up from 50.3 in January, remaining
in the expansion territory and the sharpest expansion since December
2020. The private survey typically better reflect trends among smaller
and more export-focused private companies.
Overseas demand has rebounded in February and was strong, said Yao Yu,
founder of RatingDog, in a note, and new export orders have grown
notably.
“The mixed bag of manufacturing PMI data suggests a similar trajectory
to what we observed in 2025,” said Lynn Song, chief economist for
Greater China at ING Bank, in a research note. “Resilient external
demand (is) continuing to drive growth, while domestic demand has been
disappointingly soft.”
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Workers labor at a ceramic ware factory, in Handan in north China's
Hebei province on Nov. 4, 2025. (Chinatopix Via AP, File)
 The Supreme Court ruling last month
against Trump’s reciprocal tariffs, which resulted in the reduction
in U.S. tariffs globally including for China, is also likely to
provide a “small boost” to exports and manufacturing activity over
the coming months, said Zichun Huang, a China economist at Capital
Economics, in a recent note.
U.S. President Donald Trump’s planned meeting with Chinese leader Xi
Jinping in April, which could bring about an extended trade truce
between the two countries, could also be positive news for Chinese
manufacturers.
China’s domestic demand weakness, however, is likely expected to
continue to be a problem, analysts said, as a prolonged real estate
sector downturn dragged on consumption and investment.
This week, China is set to unveil its economic growth target at its
annual national congress that begins Thursday, with economists
expecting a growth target of 4.5% or above.
The congress, which lasts for around a week, will also approve
Beijing’s five-year policy blueprint for 2026-2030, with an expected
focus on areas such as boosting technological advancements and
self-reliance.
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