Official data: China factory expansion holds as Middle East-related disruptions fuel export surge despite domestic slowdown

China’s manufacturing sector extended its expansion for a second consecutive month in April, supported by firmer production and a short-lived boost in external demand as exporters rushed shipments amid rising Middle East tensions.

The official manufacturing PMI edged down to 50.3 from 50.4 in March, but stayed above the 50 threshold and beat expectations of 50.1.

Production momentum improved, with the production index rising to 51.5, up 0.1 percentage points month-on-month, signalling a modest acceleration in factory activity. New orders eased to 50.6, down 1 percentage point, but remained in expansion territory, indicating demand is slowing but still resilient.

External demand was a key support, with new export orders climbing to 50.3, the highest since April 2024. This points to front-loading by overseas buyers seeking to lock in supply ahead of potential cost increases linked to Middle East geopolitical risks.

However, inventory signals were weaker, with raw material stockpiles still in contraction despite a slight monthly improvement, reflecting cautious restocking behaviour among manufacturers.

Outside the factory sector, momentum weakened further. The non-manufacturing PMI slipped to 49.4 in April from the previous month, moving deeper into contraction as services and construction activity softened, highlighting uneven domestic demand despite export-led support.

Written by: Farid Muzaffar