by XIN Yuan

China's factory activity returned to expansion in December for the first time in eight months, official data showed on Wednesday, as recent fiscal and credit support began to feed through to investment and output.

Data from the National Bureau of Statistics showed the manufacturing purchasing managers' index (PMI) rose 0.9 points from November to 50.1, back above the 50 mark that separates expansion from contraction.

The upturn followed a series of stimulus measures rolled out from late September. Authorities had deployed 500 billion yuan in new policy-backed financial instruments by October to support infrastructure and manufacturing investment, while faster issuance of another 500 billion yuan in special-purpose bonds before year-end strengthened local government finances and added about 200 billion yuan in project funding.

Sub-indexes showed broad improvement. The production index rose to 51.7, up 1.7 points, while the new orders index climbed 1.6 points to 50.8. New export orders improved but remained in contraction at 49.0, up 1.4 points.

By company size, large manufacturers led the upturn. PMI for large firms rose 1.5 points to 50.8, staying in expansion. Medium-sized enterprises edged up 0.9 points to 49.8, still below the threshold, while small firms lagged, with PMI falling 0.5 points to 48.6.

Looking ahead, WANG Qing, chief macro analyst at Golden Credit Rating, said manufacturing momentum in 2026 would depend on the strength of China's growth-support policies, continued resilience in high-tech manufacturing, the impact of higher U.S. tariffs on global trade, and additional property-sector support.

He expects the macro environment next year to continue to see strong supply and relatively weak demand, with manufacturing PMI likely to stay below 50 for much of 2026, as it did in 2025. Still, he said China's relatively low government debt, subdued inflation and ample policy space should help cushion the sector.

Separate data showed the non-manufacturing PMI rose to 50.2 in December, up 0.7 points. The construction activity index jumped to 52.8, while services edged up to 49.7.

Within services, telecommunications, broadcasting and satellite transmission, financial services and capital market services all posted activity indexes above 60, while retail and catering remained below the expansion threshold, highlighting uneven demand.