China’s factory activity weakened in January, with official data showing manufacturing output slipping back into contraction territory. The reading signalled softer demand and ongoing pressure on industrial production at the start of the year. New orders declined, while export demand remained subdued amid fragile global trade conditions. Business sentiment softened as firms faced pricing pressure and cautious consumer behaviour. The data renewed concerns about the pace of China’s economic recovery.

Manufacturers reported slower production growth and weaker purchasing activity across several regions. Analysts said domestic demand has yet to show a strong rebound despite targeted policy support. Property-sector challenges and cautious household spending continue to weigh on confidence. Supply chains remained stable, but utilisation levels were uneven. Firms showed restraint in hiring and investment decisions.

Financial markets reacted cautiously to the data, with industrial commodities facing mild pressure. Investors continue to assess how China’s slowdown could affect global growth and trade flows. Regional equity markets showed mixed responses, reflecting selective exposure to China-linked assets. Policy expectations became more prominent in market discussions. Attention turned to potential stimulus measures.

Economists expect authorities to maintain a supportive stance through fiscal and monetary tools. Further data releases will be closely watched for signs of stabilisation or further weakening. China’s economic direction remains a key factor for global markets. The outlook hinges on restoring demand confidence.

Source: Reuters