China’s manufacturing sector delivered a tale of two surveys in May. One pointed to solid growth. The other showed activity barely holding above stall speed. The contrast highlights persistent divides in how large state-linked producers and smaller, export-oriented firms experience the world’s second-largest economy right now.
The private RatingDog China General Manufacturing Purchasing Managers’ Index, which tracks smaller companies more exposed to global demand, registered 51.8 last month. That figure topped the 51.6 median forecast in a Reuters poll and marked the sixth straight month of expansion. Still, it eased from April’s 52.2 reading. CNBC first reported the beat on June 1, noting that factory activity expanded despite softer official figures.
By contrast, the government’s National Bureau of Statistics manufacturing PMI slipped to exactly 50.0 from 50.3 in April. The print matched economist expectations yet represented the lowest level since February. A reading of 50 separates expansion from contraction. Anything at that line signals flat activity. Reuters described the outcome as factories stalling amid weakening demand and rising costs.
New orders contracted under the official gauge, falling to 49.9. Production held at 51.2, a modest slowdown. New export orders dropped to 48.6. Input prices stayed elevated even as the pace of increase moderated. Employment remained weak. These sub-index details, released May 31, paint a picture of softening momentum after two months of mild growth. Xinhua highlighted that high-tech manufacturing and equipment sectors continued to outperform, posting readings of 52.9 and 52.1 respectively.
The divergence between the two surveys is not new. The official NBS series samples more state-owned and larger enterprises. RatingDog, formerly known as Caixin/S&P Global in earlier iterations, focuses on private and smaller manufacturers. Their differing results often reflect how policy support flows unevenly across company sizes. Larger firms benefit more from government infrastructure and stimulus. Smaller ones feel global trade currents more acutely.
And those currents turned choppy. Geopolitical tensions tied to the Middle East conflict pushed up raw material costs. New export orders contracted at the fastest pace in months. Domestic demand showed cracks too. Retail sales had already hit a 40-month low in April. Yet tourism spending surged during the extended May Day holiday, offering some offset in services. The non-manufacturing PMI actually improved to 50.1 from 49.4, helped by travel and construction-related activity.
Economists took note. Goldman Sachs analysts said the official PMI data suggested “subdued manufacturing sector growth, increased services activity, and continued decline in the construction industry.” Their assessment, cited across multiple reports on May 31, underscores the uneven nature of China’s recovery.
But why the split signals? Smaller exporters captured firmer overseas orders in some categories. Panellists in the RatingDog survey told of higher new orders driven by market demand, product improvements, new customers and promotional campaigns. Growth in total new orders remained among the strongest in five years despite the slight slowdown from April. Investing.com reported on the stronger private reading June 1, quoting survey details that pointed to sustained demand.
Input cost pressures eased somewhat in the private survey. That offers a small reprieve from earlier spikes linked to energy and commodity volatility. Price pressures moderating could reduce deflation risks that have worried Beijing. Still, factories continued to face higher costs for raw materials even as supplier delivery times improved marginally.
Employment trends stayed soft in both surveys. The official employment sub-index held near 48.6. Hiring reluctance reflects caution among producers who see new orders softening. Business sentiment, while positive, edged lower.
These May figures arrive at a delicate moment. China’s leadership has signaled more policy support could come if growth falters further. Markets now watch for signs of additional stimulus, especially targeted at smaller manufacturers and consumption. The private survey’s relative strength suggests pockets of resilience. Yet the official data warns that broader momentum is fragile.
High-tech sectors offered the brightest spot. Their outperformance aligns with Beijing’s long-term push toward advanced manufacturing and reduced reliance on traditional heavy industry. Equipment makers also posted gains. Such shifts may cushion the economy over time. They do not, however, immediately solve weak demand in more conventional factory segments.
Global investors parsed the numbers for clues about China’s trajectory. The official PMI at the neutral line feeds concerns that the post-pandemic rebound has lost steam. Export orders contracting adds another layer. Trade tensions, higher commodity prices and softer domestic consumption combine to create headwinds.
Services provided a counterbalance. The pickup in tourism, especially in smaller cities where hotel occupancy rates rose, points to rebalancing away from pure manufacturing reliance. H World Group noted stronger performance outside major urban centers. That trend could support consumption if extended.
Still, construction continued to weigh. The sector’s weakness in official data reflects ongoing property market challenges that have persisted for years. Until that sector stabilizes, overall non-manufacturing strength will remain uneven.
Analysts expect June readings to offer more clarity. If private survey strength persists while official data stays near 50, it would reinforce the narrative of two Chinas: one innovative and export-competitive, the other still grappling with excess capacity and weak internal demand.
Beijing has tools available. Past stimulus packages have lifted infrastructure spending and supported select industries. Whether more aggressive measures are needed depends on how these mixed signals evolve. For now, the May data shows an economy that refuses to contract but also struggles to accelerate. Factories keep running. Orders arrive more slowly. Costs remain a burden. And the gap between survey results reminds observers that China’s industrial health cannot be captured in a single number.
Recent coverage from Trading Economics on June 1 reinforced that manufacturers faced continued headwinds from soft domestic demand and elevated input costs linked to Middle East developments. The analysis noted output growth easing to a three-month low and new orders turning negative for the first time in months. Such details add depth to the official survey’s message.
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