China’s manufacturing activity shrank at its fastest pace since September 2022, according to a private survey. The Caixin/S&P Global manufacturing purchasing managers’ index fell to 48.3 in May, missing expectations of 50.6. This marked the first time the gauge dropped below 50 since September last year.
The decline in foreign demand accelerated in May, with new export orders falling to their lowest level since July 2023. Total new orders contracted for the first time in eight months, while employment shrank for the second straight month. Factories’ finished goods inventory accumulated due to falling sales and delays in outbound shipments.
Economists attribute the decline to uncertainty in the external trade environment, adding to domestic economic headwinds. China’s industrial output grew at a slower pace of 6.1% year on year in April. Exports rose 8.1% from a year earlier, driven by increased shipments to Southeast Asian nations.
To combat deflationary pressures and boost employment, Chinese policymakers have rolled out measures such as lowering key policy rates and reserve requirement ratio. However, Beijing faces a double-whammy of protracted property market slump and ongoing trade war. The country’s retail sales missed expectations in April, while wholesale prices posted the steepest drop in six months.
As the situation continues to deteriorate, analysts expect Beijing to take “bolder moves” to support consumption and reform its pension system.
Source: https://www.cnbc.com/2025/06/03/chinas-may-factory-activity-unexpectedly-shrinks-clocking-its-worst-drop-in-nearly-3-years-caixin-.html