Core Viewpoint - China's factory activity showed unexpected growth in December, ending an eight-month decline, driven by pre-holiday orders as officials aim to stimulate the manufacturing sector without exacerbating deflation [1]. Group 1: Economic Indicators - The official purchasing managers' index (PMI) increased to 50.1 in December from 49.2 in November, surpassing the 50-point threshold that indicates growth and exceeding the forecast of 49.2 [2]. - The production sub-index rose to 51.7 from 50.0 in November, while new orders increased to 50.8 from 49.2, marking the strongest performance since March [4]. - Supplier delivery times improved, leading to a rise in the production and activity expectations component to 55.5, the highest since March 2024 [4]. Group 2: Sector Performance - New export orders remained weak, increasing slightly to 49.0 from 47.6 in November, highlighting the necessity for officials to enhance domestic demand and reduce reliance on U.S. demand [5]. - Confidence in the manufacturing sector appears to be improving due to pre-holiday stockpiling, particularly in the agricultural, food processing, and food and beverage sectors [6]. Group 3: Challenges and Outlook - Despite the positive PMI data, experts suggest that the improvement may be short-lived, driven by month-to-month fiscal spending fluctuations rather than a sustained recovery, with structural challenges from the property downturn and industrial overcapacity expected to persist into 2026 [3]. - Domestic demand remains depressed, as indicated by a 13.1% year-on-year decline in profits for Chinese industrial firms in November, the steepest drop in over a year, suggesting that households are not compensating for the shortfall amid a slowing global economy [7].