Chinese factory activity expanded in December for the first time in eight months, with the official purchasing managers index rising to 50.1, just above the expansion threshold. Orders picked up ahead of holidays and trade tensions eased with the U.S. President Xi Jinping vows to promote high-quality development.

China’s second largest economy is forecasted to grow at just below 5% this year, supported by high-tech industries and exports. The official PMI for high-tech manufacturing stood at 52.5 in December. Equipment manufacturing and consumer goods industries also showed growth, but new export sales slightly fell and hiring weakened.

Despite an increase in overall orders, new export sales fell slightly and hiring weakened, according to a report by RatingDog. The manufacturing sector regained growth, but the improvement was marginal. The PMIs for food, textiles, clothing, and electronics were above 53, but small and mid-sized enterprises remained in contractionary territory.

Some economists believe China’s economy is growing more slowly than official figures suggest, facing challenges like a yearslong slump in the property sector and excess capacity in industries. Higher costs for raw materials have pressured company profit margins, with exporters raising prices for the first time in three months.

The upturn in activity may be short-lived, with structural headwinds from the property downturn and industrial overcapacity persisting in 2026. Limited appetite among policymakers for a big increase in demand-side stimulus suggests the Chinese economy may face challenges in the future.

Read more at Yahoo Finance: China factory activity picks up in December as orders rebound ahead of holidays