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China’s factory activity gathered speed in January, according to a private survey released Monday, as manufacturers accelerated production and front-loaded shipments ahead of the extended Lunar New Year holiday. The seasonally adjusted RatingDog China General Manufacturing PMI, compiled by S&P Global, rose to 50.3 in January from 50.1 the previous month, matching the 50.3 consensus in a Reuters poll. A reading above 50 signals expansion, while one below indicates contraction. It was the strongest level since October, when the index stood at 50.6.

Production accelerated as total new orders expanded for an eighth straight month and new export orders rebounded, driven by stronger demand from overseas buyers, particularly in Southeast Asia. Firms also hired additional staff to cope with higher workloads and to clear backlogs.

Confidence slipped, while costs rose and pricing power returned

Business confidence fell to a nine-month low amid concerns about rising costs, the survey showed. Corporate expenses increased at the fastest pace in four months, pushing factory gate prices higher for the first time since November 2024.

Metal prices rose sharply during the survey period, lifting input cost inflation to its highest level since last September. RatingDog founder Yao Yu warned that if cost pressures persist while demand recovery remains limited, profit margins will stay under pressure. S&P Global Market Intelligence associate director Jingyi Pan added that subdued confidence could weigh on demand in the coming months, and that rising geopolitical instability early this year may have encouraged firms to front-load production.

Private and official PMIs diverged again

The private reading contrasted with an official survey released Saturday. China’s National Bureau of Statistics reported that manufacturing activity unexpectedly contracted in January, with the official PMI at 49.3, down from 50.1 in December.

The RatingDog survey samples a smaller group of more export-oriented manufacturers and has often painted a brighter picture than official polls covering a broader range of firms. NBS officials attributed the official decline to seasonal factors and softer global demand. Local media also reported that some factories halted production so workers could travel home ahead of the holiday.

Holiday timing matters more this year

This year’s Lunar New Year holiday has been extended to nine days for the first time, running from Feb. 15 to Feb. 23, as Beijing aims to boost domestic spending on travel, tourism, dine-out services, and leisure activities.

Broader backdrop: exports support growth, but domestic strains persist

The PMI readings offer an early view of how the world’s second-largest economy started the year. China met its 5% growth target last year, supported by strong exports as manufacturers ramped up shipments to non-U.S. markets amid higher U.S. tariffs.

Economists continue to warn about persistent deflationary pressures. Retail sales have slowed to the weakest pace in three years, and fixed-asset investment recorded its first annual decline in decades, contracting 3.8% last year as the property slump deepened and local-government fiscal constraints curbed investment.

Nomura China economist Jing Wang said growth momentum is likely to remain weak in January, citing payback effects from last year’s consumer goods trade-in program and ongoing property distress. Chinese officials launched a package of measures last month aimed at lowering financing costs and boosting credit demand, but Wang said these steps are far from enough to stabilize growth, and that Beijing will need to do much more in the coming months to deliver annual GDP growth above 4.5% in 2026.

China is expected to announce its official 2026 growth target at the annual parliamentary session in March.