China’s Caixin PMI index contracted for the first time in two months, standing at 49.5 in April

China’s small and medium manufacturing industry contracted in April as the Caixin Purchasing Managers’ Index (PMI) registered 49.5 for the month.
Slightly above the official PMI data released by the national statistics agency, which focuses on large manufacturers. Although supply expansion slowed and global demand fell, foreign demand improved slightly. However, business expectations remain strong.

Smoother increase in manufacturing supply

Although the manufacturing production index remained above the expansion threshold in April, companies reported that new orders were lower than expected, thereby slowing production growth, according to the Caixin survey.

External demand picked up slightly

Foreign demand picked up slightly after the contraction in March, and in April it was modestly in expansion territory. Export activity became more convenient with the lifting of pandemic restrictions, supporting the improvement in sales.

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Optimism remains about the prospects

Despite the slowdown in supply and contraction in demand, manufacturers maintain strong expectations for future production and operation. The confidence index rose to its second highest level in two years.

Foreign demand picked up slightly after the contraction in March, and in April stood modestly in expansion territory

As the impact of the pandemic continues to fade, companies are confident that customer demand will strengthen and market conditions continue to improve, supporting growth expectations.

“In the future, relevant policies should focus on expanding domestic demand, stabilizing employment and improving expectations, as well as improving the monetary transmission mechanism and creating a virtuous circle of economic development,” said Dr. Wang Zhe, chief economist at Caixin Insight Group.

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