China’sfactory activity was flat in May, according to an official survey released Sunday, raising questions about how much further the country’s economy can shield itself fromthe falloutof the ongoing Iran war and pressure on demand.
The official manufacturing purchasing managers index moderated to 50from 50.3 in April, according to the National Bureau of Statistics. Measured on a scale between 0 and 100, a PMI reading above 50 indicates expansion, while a reading below 50 reflects contraction.
The new orders sub-index dropped to 49.9 from 50.6 in April, while the sub-index on production edged down to 51.2 from April’s 51.5. The sub-index for raw material stockpiles fell to 48.6 from 49.3 in April.
China has beenless affectedby the global energy shock from the Iran war than many other countries, which faceinflationary pressuresas as oil prices have surged due to the closure of the Strait of Hormuz, through which a fifth of the world’s oil is shipped in peacetime.
Analysts say China’s ample oil reserves anddiversified sources of energyhave helped the world’s second-largest economy weather the war nearly unscathed.
“Though the energy crisis remains the dominant headwind for Asia, China is relatively more shielded given its robust energy security set-up,” Frederic Neumann, Chief Asia Economist at HSBC bank, wrote in a research note last week.
Meanwhile, exports remain key for China’s broader economy, HSBC said.
While China’s exports to the United States have dropped year-on-year during most months in the past year, its global exportshave been robust, particularly to Europe and Southeast Asia.
Hopes for a recovery in exports to the U.S. have risen following President Donald Trump’ssummitwith Chinese leader Xi Jinping in Beijing in mid-May, and after the two countries agreed to set upseparate boards of trade and investment.
Autos, technology andartificial intelligence-relatedexports have been helping to drive export growth, but some economists also point to concerns over the broader economy.Domestic demand remains sluggishin the wake of a years-long property sector slump that has clobbered consumer confidence and investment.
“Domestic demand is lagging, but high-end manufacturing and exports are holding the line,” Robin Xing, Chief China Economist at Morgan Stanley, wrote in a research note last week.
Chinese leaders have set an annual economicgrowth target of 4.5% to 5%for this year. That’s thelowest target since 1991, albeit only slightly lower than the“around 5%” targetset in 2025.
Morgan Stanley said China will still likely meet its 2026 target, but oil prices and the easing of uncertainties around global oil supplies would be key factors determining where things might be heading.
English (United States) 
Chinese