BEIJING (AP) — China’s factory activity showed minimal growth in May, with the official manufacturing purchasing managers index edging down to 50.0 from 50.3 in April, according to data released Sunday by the National Bureau of Statistics. A reading above 50 indicates expansion, while below 50 signals contraction.
The new orders sub-index slipped to 49.9 from the previous month’s 50.6, and the production sub-index declined to 51.2 from 51.5. Meanwhile, the sub-index tracking raw material stockpiles fell to 48.6 from 49.3 in April.
Despite these challenges, China has been relatively insulated from the global energy shock triggered by tensions in the Iran region, which has sent oil prices surging worldwide due to concerns over the Strait of Hormuz, a critical shipping route for roughly 20% of global oil trade. Analysts note that China’s substantial oil reserves and diversified energy portfolio have helped buffer the economy from severe impacts.
“While the energy crisis remains a dominant headwind for Asia, China is better shielded thanks to its robust energy security infrastructure,” noted Frederic Neumann, chief Asia economist at HSBC.
Exports continue to play a crucial role in supporting China’s economy. While exports to the United States have declined year-over-year in most months over the past year, shipments to Europe and Southeast Asia have remained strong. Optimism has grown regarding U.S. exports following the mid-May summit between President Donald Trump and Chinese leader Xi Jinping, which led to agreements on establishing trade and investment coordination mechanisms.
However, domestic demand remains weak, pressured by the protracted slump in the property sector that has eroded consumer confidence and investment. “Domestic demand is lagging, but high-end manufacturing and exports are providing some stabilization,” observed Robin Xing, chief China economist at Morgan Stanley.
Chinese authorities have set an annual economic growth target of 4.5% to 5% for this year—the lowest since 1991. Morgan Stanley expects the country will still achieve this target, though oil price movements and any further normalization of global oil supply will be key determinants moving forward.
