China Manufacturing Rebound Strengthens Xi’s Hand Entering 2026

BEIJING — China’s private manufacturing sector returned to expansion in December, signaling a stabilization of the real economy that offers General Secretary Xi Jinping vital political breathing room as he enters a critical year for his administration.

The rebound provides tangible evidence that the "proactive fiscal policies" Beijing pivoted toward in late 2025 are finally transmitting to the broader market. For analysts gauging regime stability, this turnaround mitigates the acute economic distress scenarios often required to precipitate leadership challenges within the Chinese Communist Party (CCP).

The private manufacturing gauge (historically the Caixin PMI), which tracks smaller, export-oriented enterprises, climbed back into growth territory in December. This marks a pivotal shift from November, when the index slipped into contraction at 49.9. According to the underlying data, the recovery was driven by a supply-side response to earlier sluggishness, with manufacturers aggressively launching new products to stimulate demand and pre-loading production ahead of the Lunar New Year in early 2026.

Crucially, this private-sector resilience aligns with the official National Bureau of Statistics (NBS) PMI, which rose to 50.1 on December 31. The convergence of both state and private indicators suggests a broad-based stabilization, offering early vindication for the administration's Q4 push for consumer goods trade-in programs and manufacturing subsidies.

For the current leadership, the timing is decisive. The concurrent rise of official and private PMIs counters the narrative of a deflationary spiral and questions regarding the efficacy of Beijing’s centralized economic management. By steering the manufacturing sector back toward expansion, Xi strengthens his mandate leading into 2026, dampening speculation that economic mismanagement could serve as a wedge for factional dissent or forced leadership changes.