China’s factory activity weakened more than expected in February as the Lunar New Year holiday disrupted production and shipments.
A cargo ship sits at a berth at the Lianyungang Port Container Terminal in Jiangsu Province on March 1, 2026.
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The official manufacturing purchasing managers index (PMI) dropped to 49 in February, from January’s 49.3, missing economists’ expectations of 49.1. A reading below 50 signals contraction, while a reading above 50 indicates expansion.
This marks a second consecutive month of contraction, with February’s PMI echoing levels seen in October and April 2025. Earlier, January’s official PMI came in at 49.3 after a brief rebound in December.
The composite PMI, which covers both manufacturing and services, slipped to 49.5 from 49.8 in January. The non-manufacturing PMI, which includes services and construction, moved up slightly to 49.5 (+0.1 point).
Huo Lihui, the chief statistician at the National Bureau of Statistics (NBS), attributed the dip to the holiday slowdown in factory operations during the Lunar New Year, as well as timing distortions from the festival.
This year’s holiday spanned February 15–23, the longest on record, compared with eight days around late January to early February last year.
In contrast, a private gauge, the Rating-Dog China General Manufacturing PMI from S&P Global, signaled a sharp rebound in February. It surged to 52.1, the strongest reading since December 2020, with growth driven by robust new export orders.
The private survey focuses on a smaller group of export-oriented manufacturers and is conducted mid-month, while the official PMI covers more than 3,000 companies and is compiled at month-end, according to Goldman Sachs.
Preliminary official data suggest increases in travel, entertainment spending, and duty-free purchases during the holiday. China will release February’s consumer and producer price indices next week.
As the world’s second-largest economy, China has struggled to escape deflationary pressures since the pandemic, weighed down by a prolonged property downturn and a weak job market outlook.
Beijing is set to unveil a new round of economic targets at the annual parliamentary session on Thursday. Economists generally expect the growth target to be lowered to about 4.5%–5%, down from the roughly 5% target in recent years.
The upcoming policy briefing may offer clues about Beijing’s stance going forward. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, suggests policymakers will pursue moderate increases in investment if growth momentum stays weak.
