China factory activity slowed in May as official PMI slipped to 50.0

China’s official data showed factory activity stalled in May after two months of expansion, with the National Bureau of Statistics (NBS) reporting the manufacturing PMI eased to 50.0 from 50.3, effectively straddling the growth-contraction divide. The reading signals the manufacturing sector faces renewed headwinds.

Breakdown of the survey highlighted weakening demand alongside persistent cost pressures: the production sub-index stood at 51.2 while the new orders sub-index fell to 49.9 from 50.6, and new export orders dropped to 48.6 from 50.3. The purchase price index for raw materials remained elevated at 60.5, indicating continuing upward pressure on input costs that is squeezing margins for many manufacturers.

Analysts pointed to the ongoing Middle East conflict as a factor that has pushed energy prices higher and disrupted shipping through key chokepoints, indirectly raising costs for Chinese industry. Reports noted that the geopolitical shock since late February has amplified energy-related cost pressures, which, combined with weaker external demand for certain consumer goods, have weighed on factory output.

The PMI data also showed divergence within manufacturing: high-tech and equipment manufacturing registered PMI readings of 52.9 and 52.1 respectively, outperforming the broader sector, while energy-intensive industries contracted. Meanwhile, the non-manufacturing PMI — covering services and construction — rose to 50.1 from 49.4, signaling some improvement on the services side that could partially offset manufacturing weakness.

Looking ahead, market observers say policymakers will need to balance measures to shore up domestic demand against structural reforms; Beijing’s readiness to set a more modest 2026 GDP target and intervene to correct supply-demand mismatches was noted as a likely policy backdrop. The path of energy prices and external demand in coming months will be key determinants of manufacturing momentum and corporate profit pressures.