In May, China’s manufacturing activity took an unexpected hit, with the Purchasing Managers’ Index (PMI) dropping to 49.5 from April’s 50.4, raising concerns about the economy. The decline, reported by the National Bureau of Statistics (NBS), highlights weak business sentiment due to sluggish domestic demand and a struggling property sector.
With the PMI signaling contraction below 50, the new order index also fell by 1.5 points. The non-manufacturing business activity index dipped by 0.1 points, mainly influenced by downturns in real estate and finance. The construction sector saw a decline as well, with its index down by 1.9 points.
Economists at Capital Economics and Morgan Stanley are concerned, foreseeing limited recovery momentum. They anticipate the need for more fiscal support and property stimulus, despite structural challenges. The IMF has adjusted China’s GDP growth forecast to 5% for 2024 and 4.5% for 2025, emphasizing the importance of supportive policies, especially for the housing sector.
China’s Economic Challenges
The ongoing property market slump has led to significant consumer confidence erosion, prompting government interventions such as lending programs and easing mortgage conditions. Escalating trade barriers and economic challenges, like US tariffs and rising input costs, add to China’s troubles.
China must address these challenges with effective policies and strategic reforms to ensure sustained growth and stability.