China: Services boom, manufacturing stutters, but fear unites everyone

January 2026 presents us with a two-speed China: while the service sector is accelerating significantly, manufacturing is showing only timid signs of recovery. The common thread? Exports keeping the ship afloat and a steep decline in confidence about the future.

The Chinese economy continues to move in a difficult-to-interpret chiaroscuro, suspended between signs of a technical revival and an underlying pessimism that shows no sign of dissipating. While the January RatingDog Services PMI data had sparked hope with a jump to 52.3 points , the integration with the manufacturing sector figures, recently released by S&P Global, paints a much more complex and nuanced picture. Remember, these are "soft" indicators, economic forward-looking indices.

Here, however, from Tradingeconomics , is the chart on the services PMI, two-year horizon:

Manufacturing: A recovery with the "handbrake" on

While services are celebrating their best expansion since October, the industrial sector is struggling to get into gear. The RatingDog China General Manufacturing PMI stood at 50.3 in January, up slightly from 50.1 in December . This is technically in expansionary territory (above 50), but it's anemic growth, defined by analysts themselves as "fractional . "

Unlike services, which saw a significant boost, manufacturing production grew only "slightly ," supported, as with the service sector, by a breath of fresh air coming from abroad. New export orders have returned to growth, driven in particular by buoyant demand from Southeast Asia . This confirms that, without foreign support, Chinese domestic demand would struggle to support the full burden of the recovery.

Pricing: two opposing strategies

This is where the most interesting divergence between the two sectors emerges. In the service sector, companies have kept prices stable to avoid losing customers, absorbing costs. In manufacturing, however, the tune has changed: for the first time since November 2024, factories have raised selling prices . The cause? A surge in input costs, driven in particular by the rising prices of metals, protagonists of a bull market that "still shows no signs of peaking . " Industrial cost inflation has reached its highest level since September, forcing companies to pass on part of the burden to end customers .

The paradox of work and trust

There is, however, one common positive: employment . Factories, for the first time in three months, have resumed hiring to fill pending orders , aligning with the trend already seen in services (which resumed hiring for the first time since July).

However, another data should give us pause: despite the green numbers, sentiment is in the doldrums . Manufacturing confidence has slipped to a nine-month low , mirroring the pessimism already seen in the service sector. Concerns about rising costs and an uncertain global economic outlook weigh like millstones . Yao Yu of RatingDog brutally summed up the situation: if costs continue to rise while the recovery in demand remains limited, profit margins will be crushed .

A giant with feet of clay?

In short, China at the beginning of 2026 appears to us like an engine running at an uneven pace. Services are trying to pick up speed, while manufacturing is limping along, weighed down by the cost of raw materials. Both sectors are clinging to exports like a lifeboat, while eyeing the domestic horizon with apprehension. The "different international situation" is no longer just a variable, but the deciding factor that will determine whether this recovery will consolidate or whether it will be yet another technical rebound destined to fizzle out.

The article China: services are booming, manufacturing is struggling, but fear unites everyone comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/cina-i-servizi-corrono-la-manifattura-arranca-ma-la-paura-unisce-tutti/ on Wed, 04 Feb 2026 10:00:30 +0000.