China’s National Bureau of Statistics (NBS) will release the February PMIs over the weekend, with expectations for improvements in both manufacturing and services. Manufacturing PMI is anticipated to enter expansion territory after a contraction in January, influenced by the Lunar New Year holiday.

Recent data shows fluctuations in manufacturing activity, with the PMI rising to 50.3 in November 2024 before dropping to 49.1 in January 2025. The non-manufacturing PMI experienced similar trends, dipping to 50.2 in January 2025 after a recovery in December.

The NBS and Caixin/S&P Global PMIs differ in scope and methodology. The NBS PMI focuses on large state-owned enterprises, reflecting government priorities, whereas the Caixin PMI covers small to medium enterprises, offering insights into private sector performance.

Both indices provide valuable perspectives on China’s economy. The NBS PMI represents the broader economic landscape influenced by state policies, while the Caixin PMI highlights the more responsive and volatile private sector.

We expect the upcoming PMI data to shed light on the strength of China’s economic momentum following the New Year holiday. A reading above 50 for manufacturing would indicate a return to expansion, reinforcing recent sentiment that economic conditions are stabilising. The services sector, which has been hovering just above contraction territory, is also being watched closely for signs of continued growth.

The divergence between the official and private-sector PMIs will be particularly relevant. The former, reflecting trends in larger state-owned businesses, will show whether government-driven measures aimed at revitalising industrial activity are yielding results. The latter, with its emphasis on small- and mid-sized firms, should give a sense of how private businesses are coping with domestic demand and external pressures. If both point in the same direction, confidence in that trajectory strengthens. If not, it adds an extra layer of uncertainty.

Markets have been reacting sensitively to any signs of weakness in China, and these numbers will influence sentiment in broader risk assets. A return to expansion in manufacturing could lift spirits and reduce concerns about sluggish industrial output. On the other hand, if the numbers fail to break past contractionary territory, it could revive discussions about the need for additional policy support.

Looking beyond just the headline figures, we will also be paying attention to sub-indices such as new orders and employment. These provide context beyond the overall reading and help determine whether any improvement is sustainable. A rebound driven purely by short-term factors lacks the durability needed to shift expectations longer-term.

In the coming weeks, markets will also be digesting how policymakers interpret the data. Stronger PMIs may lead to a more measured approach from authorities when it comes to further support, while weaker prints would make additional intervention appear more likely. As attention remains on policy direction, any surprises in this data set will set the tone for expectations.