China’'s major factory sector lost momentum last month, renewing questions about how long the world's second-largest economy can withstand the deepening global energy crisis and stubborn problems with domestic demand, according to official figures released on Sunday.
The official manufacturing purchasing managers index (PMI), published jointly by China's National Bureau of Statistics (NBS) and China's Logistics and Purchasing Federation, fell 0.3 percentage points from April to a full 50 percentage points in May, the lowest reading of the index since February.
On a scale from 0’ to 100’, the shape is precisely at the threshold that separates the expansion from the contraction; This is a mathematically neutral result and is far from reassuring in context.
The detail behind the headline number raises concern.
New orders fell from 50.6’ to 49.9’ in April, while production fell to 51.2’ and raw material stocks fell to 48.6’.
However, according to the chief statistician of NBS’, Huo Lihui’, a relative power has emerged; high-tech manufacturing PMI’ increased from the previous month to 52.9’a and 52.1’e for equipment manufacturing.
An energy shock that could inevitably affect China’i
2026Most of the global economic debates in ’ have been dominated by the Iranian war and the closure of the Strait of Hormuz, where about one-fifth of the world's oil flows in peacetime, since March.
This cut caused oil prices to rise, which the International Energy Agency (IEA) described as one of the biggest supply shocks in the history of global oil markets. For most Asian countries, the main importers of oil flows at the crossing point, the consequences were severe.
But China has been relatively sheltered so far.
Beijing’in is estimated to have accumulated about 1.4 billion barrels of strategic and commercial oil reserves before the conflict began; This represents approximately 220 days of import coverage.
Increasing combustion of other fossil fuels, such as coal, rapid investments in renewables and diversified supply lines further mitigated the impact.
In a research note last week, HSBC’'s chief economist for Asia, Frederic Neumann, wrote that although the “Energy crisis remains the dominant wind for Asia, China is relatively more sheltered given its robust energy security structure, ”.
However, as the Iran war prolongs, the risks to the Chinese economy increase.
Exports stand but the domestic front struggles
Where Beijing's economy continues to show its deepest fissures, the decades-long slump in the real estate sector erodes consumer confidence, while HSBC notes that April figures are only the softest reading since the pandemic period. ter reaching 0.2, China has sharply revised ’'s 2026 forecast for retail sales growth. %from 5.2’den %He dropped 2.8’e.
Morgan Stanley ’'s chief economist in China, Robin Xing, wrote last week: “ Domestic demand is declining, but high-end manufacturing and exports remain at the border.”
Beijing, the lowest rate for 2026 since 1991’ %With a 4.5 %It set a one-year growth target of between 5 and “ of the previous three years. %5” went one step down from its target.
Morgan Stanley thinks ’'s annual economic growth target is achievable, but marks global oil market conditions as the defining joker.
U.S. exports to ’ have fallen year-on-year for most of the past twelve months, but global sales remain strong, particularly in Europe and Southeast Asia.
US President Donald Trump's meeting with Chinese leader Xi Jinping in Beijing in mid-May has brought back some optimism about bilateral trade.
