Official Purchasing Managers' Index (PMI) data for May indicates a divergence in China's economic sectors, with manufacturing expansion momentum weakening while non-manufacturing activity shows signs of recovery, maintaining an overall pattern of moderate economic growth.

Data released on May 31 shows that China's official manufacturing PMI for May stood at 50.0%, a decrease of 0.3 percentage points from the previous month, placing it precisely at the expansion-contraction threshold. The composite PMI output index was 50.5%, up 0.4 percentage points from April, suggesting that overall business production and operational activities in China continued to expand.

In contrast to the manufacturing sector's weakness, the non-manufacturing business activity index rose to 50.1%, an increase of 0.7 percentage points from the prior month, indicating a recovery in non-manufacturing sentiment. Within the service sector, industries such as railway transport, telecommunications, radio, television, and satellite transmission services, and insurance all reported business activity indices above 55.0%, reflecting a high level of expansion.

**Manufacturing Sector at Threshold, SMEs Under Pressure** The manufacturing PMI for May was 50.0%, down 0.3 percentage points from April, sitting at the critical threshold.

By enterprise size, the PMI for large enterprises was 51.1%, rising 0.9 percentage points from the previous month and remaining above the threshold. In contrast, the PMI for medium and small enterprises was 48.6% and 48.5%, respectively, declining by 1.9 and 1.6 percentage points from April, both below the threshold.

Among the five sub-indices composing the manufacturing PMI, only the production index remained above the threshold. The new orders index, raw materials inventory index, employment index, and supplier delivery time index all fell below the 50-point mark.

The production index was 51.2%, down 0.3 percentage points from the previous month but still above the threshold, indicating continued expansion in manufacturing production activity. The new orders index was 49.9%, a decrease of 0.7 percentage points, suggesting a decline in manufacturing market demand sentiment. The raw materials inventory index was 48.6%, down 0.7 percentage points, pointing to a reduction in the stock of major raw materials in the manufacturing sector. The employment index was 48.6%, falling 0.2 percentage points, reflecting a slight decrease in hiring sentiment among manufacturing firms. The supplier delivery time index was 49.2%, down 0.3 percentage points, indicating that delivery times from suppliers to manufacturers continued to lengthen compared to the previous month.

**Non-Manufacturing Sentiment Recovers, Led by Service Sector** The non-manufacturing business activity index for May was 50.1%, rising 0.7 percentage points from April, signaling a recovery in non-manufacturing sector confidence.

By industry, the construction business activity index was 48.8%, up 0.8 percentage points, while the service sector business activity index was 50.3%, increasing by 0.7 percentage points. Within services, industries like railway transport, telecommunications, radio, television, and satellite transmission services, and insurance reported business activity indices in the high-expansion zone above 55.0%. Conversely, sectors such as air transport and real estate reported indices below the critical threshold.

The new orders index for non-manufacturing stood at 45.0%, up 0.7 percentage points, indicating a recovery in market demand sentiment. By sector, the new orders index for construction was 43.5%, rising 1.9 percentage points, while for services it was 45.3%, up 0.5 percentage points. The input price index was 52.2%, increasing 0.5 percentage points, suggesting that the overall price level of inputs used by non-manufacturing firms for business operations continued to rise. For construction, the input price index was 53.7%, down 1.2 percentage points, while for services it was 52.0%, up 0.8 percentage points. The selling price index was 48.8%, rising 0.7 percentage points, indicating a narrowing decline in the overall selling price level for non-manufacturing enterprises. In construction, the selling price index was 48.6%, down 0.4 percentage points, whereas in services it was 48.9%, increasing by 1.0 percentage points. The employment index was 45.6%, edging up 0.1 percentage points, pointing to a slight improvement in hiring sentiment among non-manufacturing firms. The construction employment index was 41.4%, up 1.8 percentage points, while the services employment index was 46.4%, down 0.1 percentage points. The business activity expectation index was 54.8%, increasing 0.1 percentage points, reflecting enhanced confidence among non-manufacturing enterprises regarding market development prospects. For construction, this expectation index was 51.5%, up 1.0 percentage points, while for services it remained steady at 55.4%, unchanged from the previous month.

**China's Composite PMI Output Index** In May, the composite PMI output index was 50.5%, an increase of 0.4 percentage points from April, indicating that overall business production and operational activities in China maintained an expansionary trend.