Slump in industrial activity weighs on China's economy in May

Official statistics released by China's National Bureau of Statistics showed a slight decline in the manufacturing PMI to 50 points in May, down from 50.3 points in April, barely above the deflationary threshold amid multiple pressures facing the industrial sector. In contrast, the non-manufacturing sector witnessed a remarkable recovery, as the services and construction index rose to 50.1 points compared to 49.4 points in the previous month, exceeding analysts' expectations Emphasizing the role of services as a key supporter of economic growth. The Chinese economy has been increasingly challenged by weakening global demand and rising production costs as a result of geopolitical tensions, especially with industrial production and retail sales in April recording the slowest growth rates in years, prompting experts to call for additional stimulus packages. Chinese authorities responded with supportive monetary and fiscal measures, as the central bank lowered interest rates on loans to levels record low, and the government has also launched plans to expand public services to include migrant workers as part of a strategy to boost domestic consumption. Despite industrial challenges, Chinese exports have remained robust, buoyed by global demand for AI and semiconductor products, with Goldman Sachs andNomura estimating these sectors contributed half of export growth in April, with a record trade surplus of $1.2 trillion. On the international trade front, the recent talks between the US and Chinese presidents have not resulted in major breakthroughs, but the formation of two new trade and investment committees could pave the way for the easing of trade restrictions and the reduction of tariffs on goods worth at least $30 billion.