China Factory Activity Rebounds in Jan, Private Survey Shows

China's manufacturing sector showed renewed signs of life to start 2026, with a key private survey indicating that factory activity expanded at a faster pace in January, beating analyst expectations.

The RatingDog China General Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, climbed to 50.3 from 50.1 in December. This marks the index's highest reading since October and holds it above the 50-point threshold that separates growth from contraction.

A Split View on China's Manufacturing Health

The upbeat private survey presents a conflicting picture of China's industrial economy. An official PMI released on Saturday suggested that factory activity had actually faltered, weighed down by deteriorating orders both at home and abroad. Analysts suggest that differences in survey scope and respondent profiles likely account for the divergent results.

The data follows a year in which China's economy grew by 5.0%, meeting the government's official target. This performance was largely supported by capturing a record share of global demand for goods, which helped compensate for weaker domestic consumption. Beijing has also ramped up trade diplomacy, securing deals with Britain and Canada as U.S. President Donald Trump's administration disrupts traditional trade relationships.

Export Orders and Production Drive Expansion

The January expansion was fueled by a rebound in foreign demand and a pickup in production, according to the RatingDog survey.

• Output Growth: The rate of production accelerated to a three-month high.

• New Business: Overall new orders rose for the eighth consecutive month.

• Export Orders: After contracting in December, new export orders swung back into expansionary territory, with firms noting particularly strong demand from Southeast Asia.

Factories also appeared to be front-loading work ahead of the Chinese New Year holiday. The nine-day festival, which falls in mid-February this year, typically encourages manufacturers to accelerate overseas shipments and boost production in advance.

Hiring Improves as Order Books Fill

The increase in orders and production needs led manufacturers to expand their workforce for the first time in three months, lifting hiring to its highest level since October. This boost in staffing, combined with efficiency gains, allowed companies to reduce their backlogs of work for the first time in eight months.

Inflationary Pressures Mount for Producers

On the cost side, inflationary pressures are building. Average input costs for manufacturers rose to their highest level since September, primarily driven by price hikes for metals.

In response, producers raised their factory gate charges for the first time since November 2024. Prices for exported goods also saw a notable increase, rising at the fastest pace in a year and a half. These price hikes could offer some relief to producer margins, which have been squeezed by price cuts aimed at defending market share amid soft domestic demand.

"If cost pressures persist while demand recovery is limited, profit margins will remain under pressure," warned Yao Yu, founder of RatingDog.

Business Confidence Positive but Waning

Looking ahead, business sentiment among manufacturers remained positive at the start of the year. Companies expressed hope that new product launches and expansion plans would support sales and output over the next 12 months.

However, broader concerns about the economic growth outlook and rising costs weighed on confidence. As a result, overall optimism fell to its lowest level in nine months, signaling a more cautious outlook for the year ahead.