Data released by the National Bureau of Statistics of China showed that private sector activity rose to its highest level since March in December, driven by fiscal stimulus and loose monetary policy.
According to the report, the composite PMI increased to 52.2 from 50.8 in the previous two months. The acceleration of growth was driven by the third straight month of growth in factory activity and the strongest expansion in nine months for the service sector. The manufacturing PMI dipped slightly to 50.1 from 50.3 in November, below analysts' expectations (50.3). Meanwhile, the non-manufacturing PMI rose sharply - to 52.2 from 50.0, exceeding forecasts (50.2).
Growth in services and construction fueled this momentum, aided by upcoming Spring Festival demand. Despite the rebound, economists caution that the recovery may be short-lived, with structural issues and potential U.S. tariffs under Trump posing risks.
China’s government plans to increase fiscal support in 2025, front-loading spending to drive growth. This includes a record 3 trillion yuan in treasury bonds and expanded consumer trade-in programs. However, weak consumer demand, property sector struggles, and disinflation continue to weigh on the economy.
Industrial profits fell for the fourth consecutive month in November, while retail sales and exports missed forecasts. Analysts expect 2024 GDP growth to hover around 4.9%, reflecting a modest recovery. The World Bank raised China’s growth outlook slightly, projecting 4.9% in 2024.
Despite signs of recovery, looming U.S. and EU trade barriers, including potential Trump tariffs, remain significant challenges for China's export-driven economy.