China still grapples with slower economic recovery, with its May factory activity reportedly contracting faster than expected on weakening demand.
The sagging demand situation could put pressure on the country’s policymakers to explore more strategic options to shore up the economy.
The country’s official manufacturing purchasing managers’ index (PMI) was 48.8 this month from 49.2 in April, according to data from the National Bureau of Statistics (NBS), its lowest in five months and below the 50-point mark that separates expansion from contraction, Reuters reported.
The PMI also dashed forecasts for an increase to 49.4.
Non-manufacturing activity expanded at a slower pace in May, with the official services PMI falling to 54.5 from 56.4 in April, NBS data showed.
Challenges in China’s economic landscape
China’s economy is emerging from three years of pandemic lockdowns, but the recovery has been uneven with services spending outperforming activity in the factory, property and export-oriented sectors.
The PMIs and other economic indicators for April add to evidence that the rebound is losing steam.
Last month, imports contracted sharply, factory gate prices fell, property investment slumped, new bank loans tumbled sharply, industrial profits plunged and factory output and retail sales both missed forecasts.
Nomura, Barclays have both cut China’s 2023 GDP growth forecasts as the recovery sputters.
To spur credit growth, the central bank in March cut banks’ reserve requirement ratios.
Premier Li Qiang said this month more targeted measures were needed to boost demand, while China’s central bank said on May 15 it would provide “strong and stable” support for the real economy.
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