China small factory activity rises in May as coronavirus lockdowns end

Caixin manufacturing purchasing managers’ index (PMI) rises to 50.7 in May from 49.4 in April

Manufacturers record fastest growth in nine years but demand subdued due to continued decline in export orders

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After months of lockdowns caused by the coronavirus pandemic, production at China’s small factories is returning to growth. Photo: Xinhua

Published: 10:50am, 1 Jun 2020Updated: 10:51am, 3 Jun 2020

Production at smaller Chinese factories improved sharply in May, with a return to growth in overall activity after last month’s contraction, according to new data released on Monday.

The Caixin manufacturing purchasing managers’ index (PMI) rose to 50.8 in May – its highest level since January – from 49.4 in April, as the sector improved after the end of months of lockdowns because of the coronavirus pandemic. A figure below 50 indicates sector activity is contracting. The further below 50, the greater the contraction.

The official manufacturing PMI data – which polls larger factories than the private Caixin/Markit survey – released on Sunday showed sector growth easing slightly to 50.6 in May from 50.8 in April, while still positive.

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The end of the lockdowns allowed factories to significantly expand production in May, with the rate of increase in output the fastest in nine years, according to the data compiled by IHS Markit.

However, overall new orders remained “subdued” due to a fall in export orders. As a result, the order backlog fell in May for the first time since 2016. Smaller manufacturing firms also continued to reduce staffing in May, the report said.

“Supply was generally stronger than demand in the manufacturing sector, as production continued its expansion amid a broader economic rebound while demand had yet to recover,” said Wang Zhe, senior economist at Caixin Insight Group.

Despite signs of recovery, analysts said there were few indications of a marked pick-up in the overall pace of economic growth.

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