China’s factory activity was flat in May, according to an official survey on Sunday, with weak domestic demand and higher production costs continuing to weigh on manufacturers. The data, reported by Reuters, showed the sector stuck at a delicate point as broader economic pressures persist.
The National Bureau of Statistics’ manufacturing purchasing managers’ index (PMI) came in at 50, down slightly from 50.3 in April and exactly at the level that separates expansion from contraction. That matched economists’ expectations in a Reuters poll.
Under the surface, the picture was uneven. Production held up at 51.2, but new orders dipped to 49.9, pointing to softer demand. Raw material inventories also stayed under pressure at 48.6, suggesting manufacturers are still working through weaker input demand.
The figures add to signs of cooling momentum in the world’s second-largest economy. Recent data has already pointed to slower growth in April despite a rebound in exports. At home, a weak property sector, softer employment conditions and cautious consumers continue to limit demand, leaving China more dependent on external markets to support factory output.
Policy direction is also shifting. Beijing has acknowledged the mismatch between supply and demand and has set a less ambitious GDP growth target for 2026, signalling more room for longer-term restructuring rather than short-term stimulus.
At the same time, external pressures are building. The war in the Middle East, which has disrupted shipping through the Strait of Hormuz, has pushed energy prices higher, adding cost pressure for manufacturers and squeezing margins.
Trade tensions are also unresolved. A mid-May meeting between Chinese and US officials did not extend a previous trade truce agreed last year, although both sides said they would continue discussions on potential tariff reductions affecting around US$30 billion worth of goods each.
The impact across industries has been uneven. Petrochemical producers and other upstream sectors have faced higher imported input costs, while parts of advanced manufacturing have held up better thanks to stockpiling and steady global demand for semiconductors and AI-related goods.
High-tech and equipment manufacturing both outperformed in May, with PMI readings of 52.9 and 52.1, respectively, while energy-intensive industries contracted.
Outside manufacturing, there was a slight improvement. The non-manufacturing PMI, covering services and construction, rose to 50.1 from 49.4 in April, pointing to marginal growth in the wider economy.
