The latest data from China’s Purchasing Managers’ Index (PMI) for December 2025 reveals a fragile yet positive rebound in economic activity, with the manufacturing sector edging into expansion territory. The Manufacturing PMI rose to 50.1%, marking the first time above the 50 threshold since early 2024. This modest expansion was driven by a Production Index of 51.7% and a New Orders Index of 50.8%, indicating growing output and demand. However, the Employment Index remained below the threshold at 48.2%, signaling continued labor market challenges despite improving production.

In contrast, the non-manufacturing sector displayed mixed signals. While the Business Activity Index reached 50.2%, reflecting slight expansion, the Service Sector Index dipped to 49.7%, suggesting contraction. The New Orders Index for services fell to 47.3%, underscoring weak demand in this segment. Meanwhile, construction activity held steady at 52.8%, providing a counterbalance to service sector weakness. On the pricing front, both sectors showed divergent trends: the Main Raw Materials Purchase Price Index climbed to 53.1%, indicating rising input costs, while the Factory Gate Price Index declined to 48.9%, pointing to downward pressure on producer prices.

Overall, the Composite PMI Output Index stood at 50.7%, confirming broad-based recovery momentum. The divergence between manufacturing and non-manufacturing sentiment highlights uneven recovery dynamics—manufacturing is gaining traction through improved production and order inflows, whereas services remain constrained by weak demand and subdued price expectations. Rising input costs pose inflationary risks, but declining factory gate prices may signal cautious pricing strategies amid softening demand. Policymakers will likely focus on sustaining momentum in manufacturing while addressing structural weaknesses in the service sector to ensure balanced growth.