China’s Factory Activity Contracts for Second Month, Signaling Economic Headwinds

China’s manufacturing sector continued to contract in February, according to official data released on Wednesday, raising concerns about the country’s economic recovery. While a private survey indicated a rebound, the discrepancy highlights ongoing uncertainty in the world’s second-largest economy.

Official PMI Data Points to Contraction

The official manufacturing Purchasing Managers’ Index (PMI) fell to 49 in February, according to the National Bureau of Statistics of China. This marks the second consecutive month of contraction, mirroring levels seen in October and April 2025. A reading below 50 indicates a decline in manufacturing activity, while a reading above 50 suggests expansion. The January PMI had been 49.3, following a brief improvement in December.

The composite PMI, encompassing both manufacturing and services, as well decreased to 49.5 from 49.8 in January. The non-manufacturing PMI, which covers services and construction, edged up slightly to 49.5.

Lunar New Year Holiday Cited as a Factor

Huo Lihui, chief statistician at the National Bureau of Statistics, attributed the decline to the extended Lunar New Year holiday, which ran from February 15 to February 23 – the longest on record. This extended break led to a slowdown in factory operations and production, with distortion effects from the festival timing.

Private Survey Shows Rebound, Driven by Export Orders

While, a private survey offered a contrasting view. The RatingDog China General Manufacturing PMI, conducted by S&P Global, surged to 52.1 in February, the strongest level since December 2020. This rebound was fueled by a significant increase in new export orders.

According to the release, “International demand picked up notably, with new export orders rising at the most pronounced pace since September 2020.” Goldman Sachs noted that the private survey samples a smaller group of export-oriented manufacturers and is conducted mid-month, while the official poll covers a larger sample and is compiled at month-end.

Economic Targets and Policy Expectations

Preliminary official figures suggest a rise in travel, entertainment spending, and duty-free shopping during the holiday period. However, China continues to grapple with deflationary pressures stemming from a prolonged property downturn and a weak job market.

Policymakers are expected to announce a series of economic targets at the parliamentary meeting on Thursday. Economists generally anticipate a reduction in the growth target for this year to a range of 4.5% to 5%, down from “around 5%” targeted in recent years.

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, expects the government to moderately boost investment if growth momentum continues to weaken.

Lianyungang Port: A Key Logistics Hub

Amidst these economic shifts, key infrastructure projects like Lianyungang Port in Jiangsu Province are evolving into major international freight hubs. The port, a vital gateway under China’s Belt and Road Initiative, is home to China’s first all-electric tugboat fleet and the China-Kazakhstan (Lianyungang) Logistics Cooperation Base. Lianyungang Port, the largest in Jiangsu Province, boasts 79 seaport berths and 35 inland river berths, handling 320 million tonnes of cargo annually as of 2023.