The latest data from China’s manufacturing sector signals a nuanced landscape as the Purchasing Managers' Index (PMI) for manufacturing has been reported at 50.4%, reflecting a minor decline of 0.4 percentage points from the previous monthHowever, this figure remains above the critical threshold of 50, which indicates a phase of expansion within the economyMeanwhile, the non-manufacturing PMI for April stands at 51.2%, experiencing a more pronounced drop of 1.8 percentage points compared to MarchSuch observations highlight an ongoing period of gradual economic growth, albeit at a tempered pace.

Diving into specific components of the manufacturing index indicates a mixed bag of results, with sectors such as equipment manufacturing showing a significant rise of 9.4% to settle at 62.9%. This category predominantly includes electrical machinery and related product manufacturing

Similarly, the non-metal mineral products industry improved by 5.5%, reaching 37.5%. Intermediate goods manufacturing, encompassing chemical fibers and rubber-plastic products, also saw uplifts of 6.6% and 6.3% respectively, resulting in values of 53.2% and 63.2%. The pharmaceutical manufacturing sector in the consumer goods category edged up by 2.2% to hit 58.2%. Overall, production and demand have remained in the economic expansion territory for two consecutive months, suggesting a sustained rebound in core manufacturing activities.

From a structural perspective, the disparities among large, medium, and small enterprises have begun to narrow, with the performance of small and medium enterprises (SMEs) remaining flat or even improving slightlyLarge enterprises reported a PMI of 50.3%, down by 0.8 points—a status they've maintained above the neutral mark for twelve months now, indicating their role in stabilizing the economic landscape

• The Fed's Unwilling Compromise
• U.S. Debt Ceiling Crisis
• U.S. Tech Stocks Surge Again
• Characteristics of PMI
• Wind Power Demand Set for Surge

Medium-sized companies reported a slight uptick to 50.7%, while small firms saw their indices remain static at 50.3%, signifying varying degrees of economic pressures in different business sizes.

The uptick in medium-sized enterprises can primarily be attributed to supportive input prices for intermediary productsYet, the stagnation within small enterprises is reflective of a fresh order support beginning to waneOn the policy front, the Ministry of Industry and Information Technology (MIIT) has set ambitious goals for 2024, focusing on establishing around 100 distinctive industrial clusters for SMEsThey are also pushing for a large-scale digital transformation project targeted at over 40,000 SMEs, highlighting a governmental commitment to bolstering the digital capabilities of businesses, particularly smaller onesAdditionally, robust external demand is reflected in a burgeoning export market that has positively impacted small and medium enterprises.

In the realm of non-manufacturing activities, a rapid acceleration in return to work and major projects have contributed to a resurgence in the construction sector’s PMI

This segment reported the fastest recovery amongst non-manufacturing activities, with figures indicating an operational expectation index of 56.1%, operating conditions at 56.3%, and intermediates prices at 52.2%. All these figures sit well within the expansion zone, implying positive traction in ongoing projectsThe reasons behind this rebound can be attributed to favorable weather conditions leading to expedited construction activities, coupled with a gradual realization of various significant projects across provinces.

Examining price dynamics, we observe that the gap between upstream and downstream price indices is shrinking, potentially placing pressure on corporate profitability moving forwardAs for April, the primary raw materials purchasing price index reached 54.0%, up by 3.5 percentage points from the preceding month, while the factory price index climbed to 49.1%, reflecting a 1.7 point increase

These numbers illustrate a tightening price differential between raw materials and finished goods.

From an inventory standpoint, the performance standards for equipment and policies aimed at replacing old devices with new continues to accelerate, hinting at a forthcoming replenishment phaseApril’s raw materials inventory index rested at 48.1%, steady from the previous month, while the finished goods inventory index slipped by 1.6 points to 47.3%. Both indices remain in a contraction phase; however, the rate of contraction has shown signs of easing as compared to March, suggesting the potential of a gradual replenishment cycle ahead.

When viewed from the foreign trade perspective, external demand continues to show resilience, alleviating over-worry among stakeholdersDelivering a snapshot of export performance, the new export orders for manufacturing dipped by 0.7 percentage points down to 50.6% in April, potentially reflecting a marginal slowdown in global manufacturing activities

However, high-frequency data points to an increase in China's export container shipping index by 27.4% since the beginning of the year, and a rebound in the Ningbo container shipping index from a trough of 1248.45 to 1441.05 suggests that signs of external market strength remain.

In terms of policy direction, post Two Sessions, an emphasis on incremental measures aimed at driving large-scale equipment upgrades and promoting trade-in actions for consumer goods has emerged as a focal point for financial initiativesMoreover, stringent regulatory oversight is set to become a priority for the China Securities Regulatory Commission (CSRC) as they aim to enhance the quality of listed companies and support the high-quality development of capital marketsCurrently, significant projects are progressively being rolled out across various localities, aiming to expedite policies aimed at stabilizing industrial growth