China’s Factory Activity Contracts Again in February as Lunar New Year Disrupts Production

China’s manufacturing sector weakened again in February as an extended Lunar New Year holiday disrupted production and shipments across factories, according to official government data released Wednesday.

The official manufacturing purchasing managers’ index (PMI) came in at 49, slightly below economists’ expectations of 49.1, according to the National Bureau of Statistics. A reading below 50 indicates contraction, signaling that factory activity shrank for the second consecutive month. The figure also matches contraction levels seen in October and April 2025.

The February reading follows a PMI of 49.3 recorded in January, after a brief rebound at the end of last year.

Broader economic activity also softened. China’s composite PMI, which tracks both manufacturing and services, fell to 49.5 from 49.8 in January. Meanwhile, the non-manufacturing PMI — covering sectors such as services and construction — edged down slightly to 49.5.

Officials attributed the slowdown largely to the timing of the Lunar New Year holiday. This year’s break ran from Feb. 15 to Feb. 23, making it the longest holiday period on record and temporarily halting factory operations and logistics activity.

However, a separate private survey presented a more optimistic picture of manufacturing conditions. The RatingDog China General Manufacturing PMI, compiled by S&P Global, rose sharply to 52.1 in February — the strongest level since December 2020. That survey pointed to a surge in new export orders, suggesting that international demand may be improving.

Economists note that differences in survey methodology partly explain the divergence. The private index focuses more on export-oriented firms and collects responses earlier in the month, while the official survey covers more than 3,000 companies across a broader range of industries and is compiled at the end of the month.

Despite the holiday slowdown in manufacturing, early data indicates stronger consumer activity during the festive period, including increased travel, entertainment spending and duty-free shopping.

Still, China’s broader economic recovery remains fragile. The economy has struggled to shake off deflationary pressures since the pandemic, weighed down by a prolonged property downturn and weak employment prospects.

Investors are now watching closely for signals from Beijing’s annual parliamentary meeting, where policymakers are expected to outline economic targets and policy priorities for the year ahead. Many economists anticipate that the government may lower its growth target to between 4.5% and 5%, compared with the “around 5%” goal maintained over the past three years.

Analysts expect authorities to respond with moderate stimulus measures, particularly through increased investment spending, if economic momentum continues to soften in the months ahead.