China’s manufacturing sector showed tentative signs of stabilisation at the end of 2025, with business conditions edging back into expansion territory, according to the latest S&P Global/Rating Dog Purchasing Managers’ Index data. The reading signalled a fractional improvement in operating conditions and marked the fourth month of improvement in the past five months, suggesting the sector may be bottoming out after a prolonged period of weakness.
Manufacturing output returned to growth in December after stagnating earlier in the fourth quarter. Producers cited stronger inflows of new work, supported by domestic new product launches and business development efforts, which helped lift overall sales. However, the recovery remained uneven. New export orders declined for the second time in three months, reflecting still-subdued external demand and highlighting the ongoing drag from weak global conditions.
Despite rising new orders, firms remained cautious in their purchasing behaviour. Overall purchasing activity stagnated as many manufacturers reported holding sufficient stocks of raw materials and semi-finished goods. Nevertheless, inventories of inputs increased after declining in November, partly reflecting improvements in supplier performance. Vendor delivery times shortened again in December, aided by better communication and service levels among suppliers.
Employment continued to contract, with staffing levels falling for a second consecutive month. Survey respondents pointed to a combination of resignations and redundancies, with job cuts frequently linked to restructuring efforts and cost-control measures. Reduced workforce capacity, combined with higher sales volumes, contributed to a faster accumulation of backlogs, with unfinished work rising at the quickest pace in three months. To meet demand, firms increasingly drew down existing stocks of finished goods, leading to another decline in post-production inventories.
Cost pressures intensified toward year-end, driven mainly by higher raw material prices, particularly metals. Input prices rose for a sixth consecutive month, with the pace of increase the fastest since September. Despite this, manufacturers continued to cut selling prices in an effort to support sales and clear inventories, extending a divergence that has weighed on profit margins. Exporters were an exception, with export prices rising for the first time in three months as firms sought to defend margins.
Business sentiment remained positive heading into 2026, although optimism softened from November and stayed below historical averages. Manufacturers expressed cautious confidence that new products, expansion plans and expected policy support would underpin a gradual recovery next year, even as uncertainty around the durability of the current upturn persists.
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China publishes two main PMI surveys, each capturing different parts of the industrial landscape. The official PMI is compiled by the National Bureau of Statistics and focuses primarily on large, state-owned and government-linked enterprises. Alongside this, the private-sector PMI, produced by S&P Global / RatingDog, places greater emphasis on small and medium-sized enterprises, making it a closely watched gauge of conditions in China’s private economy.
The distinction matters. While the official PMI tends to reflect conditions among larger firms with better access to credit and policy support, the private-sector survey is often seen as more sensitive to shifts in domestic demand, pricing power and employment conditions. Methodological differences also play a role, with the Caixin/RatingDog survey drawing from a broader and more diverse sample of companies. Despite these contrasts, the two PMIs often move in the same direction, offering complementary signals on the health of China’s manufacturing sector
