China’s manufacturing sector experienced its fastest growth in nearly two years in May, according to a private survey, offering a stark contrast to the weak official data that had raised concerns about the country’s economic momentum.
The Caixin manufacturing purchasing managers index (PMI) climbed to 51.7 in May from 51.4 in April, marginally above economists’ median forecast of 51.6 from a Bloomberg poll, and marking the highest reading since June 2022. A PMI above 50 indicates expansion. This positive news from the Caixin survey differed sharply from China’s official manufacturing PMI released last Friday, which unexpectedly showed a contraction in factory activity for May. The discrepancy arises because the Caixin survey focuses on smaller, export-oriented firms, while the official data encompasses a broader range of companies.
Following the Caixin report, China’s benchmark CSI 300 Index of onshore stocks reversed earlier losses, gaining up to 0.6%. Investor sentiment was further bolstered by favorable home sales and vehicle sales data. Chinese stocks listed in Hong Kong surged by as much as 3.1% after declines in the previous four sessions. The robust expansion indicated by the private survey helps mitigate concerns sparked by the official data about a potential slowdown in the manufacturing sector, a crucial component of Beijing’s economic strategy for this year. According to the Caixin survey, new export orders increased for the fifth consecutive month in May, albeit at a slower pace, suggesting sustained foreign demand for Chinese goods.
“China’s economy is generally stable and remains on the path to recovery,” stated Wang Zhe, senior economist at Caixin Insight Group, in the report accompanying the data release. However, Wang noted that challenges such as employment pressure and demand-supply imbalances persist. “Policies aimed at stabilizing the economy, boosting domestic demand, and increasing employment need to be strengthened and maintained consistently,” he added.
Manufacturing output rose at its fastest rate since June 2022, with notable growth in the consumer goods segment in May, the survey showed. Despite this, the growth in new orders decelerated slightly from April, and companies continued to be cautious about hiring additional workers.
The Caixin PMI has outperformed the official index for seven consecutive months since October, reflecting improved external demand amidst a tepid domestic market.
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