China's factory activity faltered in January as weak domestic demand dragged down production at the start of the new year.
The official purchasing managers' index (PMI) dropped to 49.3 in January, from 50.1 in December, below the 50-mark separating growth from contraction.
It missed a forecast of 50.0 in a Reuters poll of analysts.
Sub-indexes of new orders and new export orders also saw declines, respectively down to 49.2 from 50.8 in December and 47.8 from 49.0 in December.
The non-manufacturing PMI, which includes services and construction, dropped to 49.4 from 50.2 in December, falling to its lowest since December 2022.
Entering a seasonal slow period
Huo Lihui, a statistician with the National Bureau of Statistics, said in a note that some types of manufacturers traditionally enter a slow period in January and market demand remains weak.
The world's second-largest economy hit the government's official growth target of 5 per cent last year, underpinned by strong exports that defied pressure from US President Donald Trump's tariff offensive.
But the headline figure masked deep-seated imbalances in the economy. Retail sales weakened further in the final quarter, dragging fourth-quarter GDP growth to a three-year low.
Signs of unease are growing among policymakers as the domestic demand downturn persists.
Plan to boost domestic demand
Beijing has vowed to make boosting domestic demand its top priority this year while sharpening its focus on achieving tech self-reliance to reduce vulnerability to foreign trade blockades and protectionist measures.
President Xi Jinping, at a recent seminar attended by senior government officials, called for "developing advanced manufacturing vigorously" and pledged to "make domestic demand the main driving force of economic growth."
China is likely to set this year's official growth target between 4.5 per cent and 5 per cent, the South China Morning Post reported, as policymakers take a cautious approach to stimulus with a stock market bubble on their minds.
