<p>China's manufacturing sector continues to show signs of prosperity at the start of the year, with new orders (including export orders) increasing and employment rising for the first time in three months, but business confidence has fallen to a nine-month low.</p>
<p>On Monday, February 2, the latest data showed that China's January RatingDog manufacturing PMI was 50.3, remaining above the boom-bust line for two consecutive months and reaching a three-month high, up from 50.1.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/999138bb-1df1-4454-9e9c-dc36ce6c658d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/999138bb-1df1-4454-9e9c-dc36ce6c658d.png"/></p>
<p>The data presents a &#34;mixed bag&#34;: positive signals include the growth of new orders (including export orders) and the first increase in employment in three months; however, warning signs are also evident—business confidence has dropped to a nine-month low, input costs have seen the strongest increase in four months, forcing product sales prices to rise for the first time in 14 months. This indicates that while the manufacturing sector is on a recovery path, profit margins are being squeezed.</p>
<h2>Demand Side: Moderate Recovery in Domestic and Foreign Orders, New Orders Increase for the Eighth Consecutive Month</h2>
<p>New orders increased for the eighth consecutive month in January, with businesses generally reporting rising customer interest and a higher base. Notably, the performance of export orders is worth attention: new export orders returned to the expansion zone after contracting in December last year, with demand from Southeast Asian customers showing particularly significant growth, providing external support for the manufacturing sector.</p>
<p>However, the RatingDog report points out that the overall growth rate of new orders remains weak, with some businesses mentioning that high prices and a sluggish market environment are suppressing growth momentum, indicating that the recovery in demand is limited.</p>
<h2>Production and Employment: Output Accelerates, Employment Stops Declining and Rebounds</h2>
<p>Benefiting from the increase in new business volume, output has accelerated, and the production index remains in the expansion zone. To meet rising business demands and clear backlogged orders, Chinese manufacturers have increased employment for the first time in three months, with improvements in the employment sub-index being the main driver of this month's PMI expansion.</p>
<p>Purchasing activities have also expanded, with businesses buying more raw materials and semi-finished products to meet production needs, and purchasing inventories have risen for the second consecutive month. In contrast, finished goods inventories have decreased for the third consecutive month, mainly due to order shipments consuming stock, reflecting a positive trend in inventory reduction among businesses.</p>
<h2>Price Pressure: Cost Pass-Through to Prices Begins to Emerge, Sales Prices Rise for the First Time in 14 Months</h2>
<p>What investors should be most wary of is the dynamic between costs and prices. Input costs in January have increased for two consecutive months, reaching the highest level since September last year, with notable price increases in metals.</p>
<p>Under the continued accumulation of cost pressures, manufacturing companies have raised factory prices for the first time since November 2024 (14 months), with export charges also rising, and the speed of price adjustments is the fastest in nearly a year and a half.</p>
<p>Raw material prices have risen for the seventh consecutive month, with the increase in January being the fastest since September 2025. The report indicates that the current bull market in commodities driven by precious metals continues, and no peak has been seen yet. This poses ongoing pressure on manufacturing companies that rely on imported raw materials.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/707d1ba1-2660-4c39-a172-9d18f756c861.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/707d1ba1-2660-4c39-a172-9d18f756c861.png"/></p>
<h2>Business Confidence: Cautious Signals Released at 9-Month Low</h2>
<p>Despite multiple indicators showing that the manufacturing sector continues to expand, business confidence fell to a 9-month low in January, partly due to concerns over costs. RatingDog commented that the decline in business confidence indicates that the overall growth momentum of the manufacturing sector remains weak.</p>
<p>In the coming months, if cost pressures persist and the recovery in demand is limited, corporate profit margins will continue to be under pressure, and the manufacturing sector may maintain a pattern of low growth expansion. Policymakers need to pay attention to the balance between stabilizing demand and reducing costs, with fiscal efforts supporting the continuation of the &#34;dual circulation and dual innovation&#34; policy, which may help consolidate the recovery momentum of the manufacturing sector to some extent</p>

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- China's manufacturing sector shows mixed signals in January, with a PMI of 50.3, reflecting growth in new orders but a decline in business confidence to a nine-month low.  
- New orders increased for the eighth consecutive month, driven by moderate recovery in domestic and export demand, although concerns over high prices and market conditions limit growth momentum.  
- Despite rising production and employment, cost pressures have resulted in the first price increase in 14 months for manufacturers, raising concerns about future profitability and the overall strength of the recovery.

China's January RatingDog Manufacturing PMI is 50.3, with sales prices rising for the first time in 14 months