China - PMIs point to improving momentum at year-end

China Macro – Both manufacturing PMIs rose back to expansion territory in December

Overall, China’s PMIs for December (published last week and this morning) showed an improvement in growth momentum, the first general improvement in China’s PMIs since September. That was particularly true for the official PMIs published by NBS, while the alternative PMIs published by RatingDog also showed some improvement, albeit marginally. To start with manufacturing, the official PMI came in clearly stronger than expected, moving up by almost a full point to 50.1 (November/consensus: 49.2). RatingDog’s manufacturing PMI rose by 0.2 points, and also came out at 50.1 (November: 49.9, consensus: 49.8). This implies that both manufacturing PMIs are now back in expansion territory, which is for the first time since March 2025. Looking at the various subcomponents, the supply side remains stronger than the demand side (output components stay above orders components). Noteworthy was the improvement of the export subcomponent in the official survey, which rose by 1.4 points to equal a 20-month high of 49.0, although remaining in contraction territory.

Both composite PMIs up for the first time since September

On the services side, the official survey also showed the largest improvement, with the non-manufacturing PMI rising by 0.7 points to 50.2 and moving back into expansion territory (November: 49.5, consensus: 49.6). This followed a remarkably drop in November, when this index fell below the neutral mark for the first time since China’s messy Zero-Covid exit end-2022. This improvement was driven by the construction sector, with the construction sub-index of the non-manufacturing PMI jumping by 3.2 points, to a 9-month high of 52.8. This is most likely the result of a filtering through of recent stimulus measures. Meanwhile, the official services sub-index improved marginally (to 49.7, from 49.5), staying just below the neutral mark. Meanwhile, RatingDog’s services PMI published this morning was more or less stable at 52.0, remaining well above the neutral mark (November: 52.1, consensus: 52.0)., As a result of all of this, both composite PMIs (weighted average of the output components for manufacturing and services) rose in December, for the first time since September 2025. The official composite PMI rose by a full point and equalled a 9-month high of 50.7, while RatingDog’s equivalent edged up marginally to 51.3 (November: 51.2).

Still more targeted fiscal support and piecemeal monetary easing expected this year

All in all, the December PMIs suggest some filtering through of recent support measures adding a bit to growth momentum. Going forward, we still expect Beijing to add further targeted fiscal support and piecemeal monetary easing to support domestic demand and safeguard overall growth this year, but not in the form of a massive support programme (‘credit bazooka’). As we concluded from the Central Economic Work Conference held in December, supporting domestic demand remains a key policy priority for 2026, but – not surprisingly given the sharp decline in fixed investment in 2H-2025 – with some shift in focus towards stabilising investment (see China: Domestic demand slows, imbalances keep rising). We still expect annual growth to slow from 5.0% in 2025 to 4.6% in 2026 and 4.3% in 2027, also see our China Outlook 2026, The need to rebalance remains despite trade deal.