China’s factory activity stalled at the 50.0 mark that divides expansion from contraction in May, even as broader business output stayed positive on stronger services demand. That is according to the National Bureau of Statistics of China, whose latest survey put the official manufacturing purchasing managers index at 50.0, down 0.3 points from April, with the non-manufacturing business activity index at 50.1 and the composite PMI output index up 0.4 points to 50.5.
Manufacturing production held in positive territory at 51.2 as new orders contracted to 49.9, leaving factories busier than their order books. The lift came from pharmaceuticals, railway, ship and aerospace equipment and computer and electronic gear, all above 53.0, while heavier sectors such as fuel processing, chemical fibres and non-metallic minerals dragged below the threshold.
The split between firm output and soft demand drew notice beyond Beijing, and Morgan Stanley Chief China Economist Robin Xing put the recovery’s weight on its best-performing corners. “Domestic demand is lagging, but high-end manufacturing and exports are holding the line,” Xing wrote.
The new-economy lines kept climbing: high-technology manufacturing rose 0.7 points to 52.9, its sixteenth straight month in expansion, and equipment manufacturing added 0.3 to 52.1. Consumer goods slipped the other way to 49.7, down a full point, and energy-intensive industries fell harder, off 0.8 points to 47.1.
Big factories pulled ahead with a PMI of 51.1, up 0.9 points, whilst medium and small firms trailed at 48.6 and 48.5, both stuck in contraction. Input costs ran hot again: the major raw-material purchase price index reached 60.5 and the factory-gate price index 51.9, each down 3.2 points on April but still expanding for a fifth month.
The price strength ran deepest in textiles, chemical fibres, rubber and plastics and ferrous metal smelting, where both gauges stayed above 55.0 for a third month running. Services were the brighter note, with the activity index up 0.7 points to 50.3; railway transport, telecoms, broadcasting and satellite services and insurance all topped 55.0, and the sector’s expectation index reached 55.4.
Construction stayed under the line at 48.8, yet it gained 0.8 points, and its expectation index rose a full point to 51.5. The timber trade reads that gauge closely, since Chinese building demand pulls through to log and sawnwood flows.
The softer reading also comes amid the Iran war and renewed strain on demand, which Morgan Stanley counts alongside oil prices and uncertain global supply among the swing factors for China’s year.
Beijing has set 2026 growth at between 4.5 and 5 per cent, its lowest target since 1991, and Morgan Stanley still expects China to reach it even with the manufacturing gauge sitting exactly on the line.
