China Manufacturing Slips Further in May, as Recovery Falters


China’s industrial activity fell by more than expected in May amid weak global demand.

The latest data puts more pressure on policymakers to bolster the country’s disappointing economic recovery – and dragged stock markets in Asia down.

The official manufacturing purchasing managers’ index (PMI) fell to a five-month low of 48.8, the National Bureau of Statistics (NBS) said on Wednesday.

That figure is a small decrease from 49.2 in April and below the 50-point mark that separates expansion from contraction. The PMI also dashed forecasts for an increase to 49.4.

Service sector activity, meanwhile, expanded at the slowest pace in four months in May, with the official non-manufacturing PMI falling to 54.5 from 56.4.


Elon Musk Reaches China, Meets Foreign Minister Qin Gang


The readings pushed markets in Asia into the red with the yuan and Australian and New Zealand dollars tumbling and regional stocks falling sharply.

“The PMI data reveal that China may heading to a K-shaped recovery,” Bruce Pang, chief economist at Jones Lang LaSalle, said.

“The sluggish domestic demand could weigh on China’s sustainable growth, if there are no efficient and effective policy moves to engineer a broad-based recovery,” said Pang.


Weak factory data across North Asia

The PMIs also echoed weak factory data from other parts of Asia with Japan reporting a surprise decline in output and South Korean production weakening.

The world’s second-largest economy is emerging from three years of pandemic lockdowns, but the recovery has been uneven with services spending outperforming activity in the factory, property and export-oriented sectors.

The PMI sub-indexes for May showed factory output swung to contraction from an expansion while new orders, including new exports, fell for the second month.

Chemical, ferrous metal smelting and rolling processing industries faced significant declines in production and demand, the NBS said.

In the services sector, rail and air transport, accommodation and catering sectors remained in the expansion, on the back of strong May Labor Day travel, while real estate activity fell.


Rebound slowing, GDP forecasts cut

The PMIs and other economic indicators for April add to evidence that the rebound is losing steam.

Last month, imports contracted sharply, factory gate prices fell, property investment slumped, industrial profits plunged and factory output and retail sales both missed forecasts.

Analysts are now downgrading their expectations for the economy with Nomura and Barclays both cutting China’s 2023 GDP growth forecasts.

“Proactive fiscal policies, rate cuts or RRR cuts and targeted monetary policy tools together with structural reform would be key,” Jones Lang LaSalle’s Pang added.

To spur credit growth, the central bank in March cut banks’ reserve requirement ratios.

Premier Li Qiang said this month more targeted measures were needed to boost demand while China’s central bank said on May 15 it would provide “strong and stable” support for the real economy.

Amid the weakness, China’s post-pandemic stock rally is faltering as small-time investors turn bearish on equities to double down instead on safer assets.

“The sentiment in the financial market is quite bearish. It is not clear how the government interpret the current economic condition,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“There is no sign of imminent policy response. The government may continue to take a ‘wait and see’ stance for now.”


  • Reuters with additional editing by Jim Pollard




China’s Small Investors Avoiding Stocks After 20% Slump


US Funds Pull $6 Billion From China ADRs as Tensions Rise


China Reports Weak April Data, Record Youth Unemployment


China Bank Loans Plunge Far More Than Expected in April



Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.

Recent Posts

Tesla’s China-Made Monthly Sales Slip 18% Year-on-Year

The US carmaker sold 82,432 of its Shanghai gigafactory-produced vehicles last month as rival BYD…

11 hours ago

Cyclone Forces Foxconn, Pegatron to Shut India iPhone Factories

Cyclone Michaung was sweeping down India’s eastern coast, closing Chennai’s airport and sweeping cars away…

12 hours ago

India to Overtake China to Become Global IPO Leader

Chinese indexes saw double digit falls in the number of IPOs, compared to last year,…

15 hours ago

Emerging Asia Sees Largest Outflows as Funds Stay Cold on China

Hedge funds rotated their positions to developed Asia markets, including Hong Kong, Singapore and Japan

15 hours ago

EU Leaders Flying in for Economic Summit in China This Week

Chinese President Xi Jinping will meet with European Council President Charles Michel and European Commission…

16 hours ago

Record Number of Chinese Blacklisted for Debt Defaults – FT

The number of Chinese blacklisted for defaulting on debts has hit a record high, which…

16 hours ago