Chinese manufacturing economy [Photo courtesy of Reuters/Yonhap News. Reproduction and database prohibited]

China's manufacturing sector expansion has virtually stalled in May. Persistent domestic demand weakness, coupled with rising raw material and energy costs due to Middle East instability, has hampered the overall manufacturing industry.

According to data from the National Bureau of Statistics of China on the 31st, the Purchasing Managers' Index (PMI) for the manufacturing sector in May stood at 50.0. This represents a 0.3-point decrease from April and aligns with the market forecast of 50.0 compiled by Reuters.

A PMI above 50 indicates economic expansion, while a reading below 50 signifies contraction.

This index remained below the benchmark for eight consecutive months from April to November last year. It rebounded to 50.1 in December, but contracted again to 49.3 in January and 49.0 in February of this year. Subsequently, it showed positive momentum with readings of 50.4 and 50.3 in March and April, respectively.

Looking at the sub-indices for the May PMI, the production index fell by 0.3 points from the previous month to 51.2, but it was the only one of the five major indices that constitute the manufacturing PMI to remain in expansion territory.

The new orders index dropped by 0.7 points to 49.9, indicating continued weakness in demand. The raw material inventory index also declined by 0.7 points to 48.6. The employment index and the suppliers' delivery time index recorded 48.6 and 49.2, respectively, down 0.2 points and 0.3 points from the previous month.

By enterprise type, the large enterprise PMI in May rose by 0.9 points from the previous month to 51.1, showing a relatively robust trend.

In contrast, the PMI for medium and small enterprises fell by 1.9 points and 1.6 points, respectively, to 48.6 and 48.5, remaining below the benchmark.

On the same day, the National Bureau of Statistics announced that the non-manufacturing PMI increased by 0.7 points from the previous month to 50.1.

By industry, the construction industry recorded 48.8, and the service industry stood at 50.3, up 0.8 points and 0.7 points respectively from the previous month.

Among service industries, railway transport, telecommunications, broadcasting, television, and insurance showed relatively brisk activity, exceeding 55.0. However, air transport and real estate showed sluggish performance, falling below the benchmark.

The composite PMI, which combines manufacturing and non-manufacturing sectors, rose by 0.4 points from the previous month to 50.5.

Regarding last month's indicators, Wang Qing, chief macroeconomist at Golden Credit Rating, explained to Chinese economic media Jiemian News that "the impact of weak domestic demand and soaring international oil prices was significant."

Xu Tianchen, senior economist at The Economist Intelligence Unit, also analyzed that "while the Iran conflict has not had a substantial impact on China's energy security, the oil supply shortage and rising oil prices will affect some industries, such as the chemical industry."

Experts assess that with the simultaneous slowdown in manufacturing and rebound in non-manufacturing sectors, the Chinese economy is generally maintaining a moderate growth trend. However, they conclude that the recovery of domestic demand is the key variable that will determine the future economic trajectory. (Yonhap News)