China’s factory output was flat in May as domestic demand remains weak and the Iran war pressures the country’s exports.
The official manufacturing purchasing managers index (PMI) slowed to 50 in May from 50.3 in April, according to China’s National Bureau of Statistics.
Measured on a scale between 0 and 100, a PMI reading above 50 indicates expansion, while a reading below 50 reflects contraction. A reading of exactly 50 indicates no growth.
Until now, China appeared less affected by the global energy shock caused by the Iran war given its large oil reserves and diversified energy sources.
But that might be changing as China’s exports take a hit with foreign demand cooling.
While China’s exports to the U.S. have dropped throughout the past year, its global exports have been robust, particularly to Europe and elsewhere in Asia.
Vehicles and artificial intelligence-related (A.I.) exports have helped to drive China’s export growth over the past year.
But now, exports appear to be slowing along with continued struggles in the domestic economy. Domestic demand remains sluggish in the wake of a years-long property sector slump.
China’s government has set an annual economic growth target of 4.5% to 5% for this year, the lowest target since 1991.
Wall Street investment bank Morgan Stanley (MS) says China will likely meet its 2026 economic growth target, but uncertainties around oil supplies will be key to determining the outcome.
