China manufacturing PMI falls to 49.0 in February as small enterprises contract to two-year low

Factories saw weaker orders and imports.

China’s manufacturing purchasing managers’ index (PMI) fell to 49.0 in February—settling below the Bloomberg consensus of 49.2—indicating a decline in factory activity and a start to the year below expansion thresholds.

The manufacturing output sub-index fell to 49.6 as new orders dropped to 48.6 and new export orders reached 45.0, the lowest level since April 2025, according to a UOB Kay Hian report.

Imports fell to 45.6 and purchases reached 48.2. Finished goods inventories declined to 45.8, which suggests destocking.

The non-manufacturing PMI reached 49.5, remaining in contraction territory as construction activity fell to 48.2 and the services index to 49.7.

New export orders for services also dropped to 44.7. The Chinese New Year holiday in mid-February impacted construction and service transactions as workers returned home.

Index results show a gap between company sizes as large-sized enterprises rose to 51.5, supported by government infrastructure projects. Medium-sized enterprises fell to 47.5, whilst small-sized enterprises dropped to 44.8, the lowest point since mid-2024.

Cost pressures remain for producers as manufacturing purchase prices reached 54.8. In the non-manufacturing sector, input prices rose to 50.9 whilst selling prices held at 48.8, a sign of margin compression.

Business expectations rose to 53.2 before the March Two Sessions, according to the report.

UOB Kay Hian analysts expect a rebound in March as seasonal impacts fade. However, external demand and the Middle East conflict create uncertainty for the recovery momentum.