China factory activity stalls in May as demand stays weak

China’s factory sector stalled in May, a warning sign that weak demand is still holding back the world’s second-largest economy and could ripple through global supply chains, commodity markets and export-dependent industries.

The official manufacturing purchasing managers’ index fell to 50.0 from 50.3 in April, landing exactly on the line that separates expansion from contraction. Economists had expected 50.0, but the flat reading underscored how little momentum Chinese factories have built despite two months of growth. New export orders contracted, input costs kept rising, and manufacturers were left with thinner margins and less room to expand.

The details inside the survey point to a fragile recovery rather than a broad pickup. The production sub-index stood at 51.2, showing output was still growing, while the new orders index slipped to 49.9, a sign that demand was softer than factory activity itself. The raw material stockpiles sub-index came in at 48.6, suggesting firms were keeping inventories tight as they waited for clearer signals from buyers.

The weakness was not confined to factories. China’s non-manufacturing PMI improved to 50.1 from 49.4 in April, and the composite PMI output index rose to 50.5, showing overall business activity was still expanding. But the split between sectors was stark. High-tech manufacturing posted a PMI of 52.9 and equipment manufacturing 52.1, while consumer goods slipped to 49.7 and high-energy-consuming industries fell to 47.1. Large enterprises held up better at 51.1, while medium and small firms remained below 50.

For global markets, that mix matters. A manufacturing sector stuck at the threshold points to softer demand for imported parts, raw materials and industrial inputs, with potential pressure on commodity prices if Chinese orders stay subdued. It also clouds the outlook for export-heavy economies and multinational manufacturers that rely on China to absorb goods, assemble products and keep supply chains moving at scale.

The May reading fits a pattern of uneven growth. Reuters reported in April that China’s growth momentum cooled amid weak domestic demand and higher energy costs. China’s economy still posted 5.0% GDP growth in the first quarter of 2026, but retail sales remained soft, industrial output expanded 5.7% in March, and the urban survey-based unemployment rate stood at 5.4%. The latest PMI suggests Beijing’s support measures have not yet translated into a durable broad-based pickup, leaving manufacturing exposed to weak orders at home and abroad.