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China’s factory activity has expanded for a second consecutive month, led by rising high-tech manufacturing output as the government searches for new drivers to shore up its faltering economy.
The purchasing managers’ index was 50.4 in April, slightly above analysts’ expectations for 50.3 in a Bloomberg poll but below 50.8 in March, according to official statistics.
The National Bureau of Statistics said equipment manufacturing and high-tech manufacturing PMIs were 51.3 and 53.0, respectively. While these were down from the previous month, “they continued to be in the expansion range and were both higher than the overall manufacturing industry”.
“High-end manufacturing maintained rapid development,” the NBS said. Any figure above 50 shows expansion in activity.
The figures show that China’s factory activity continues to recover despite deflationary pressures and weak external demand.
Industrial profits data released on Saturday showed a decline of 3.5 per cent year on year in March, “raising further doubts about the economy’s momentum”, foreign exchange group Ebury said in a report ahead of the PMI release.
The strong growth in high-tech industries comes as President Xi Jinping emphasises “new quality productive forces”, which encompasses sectors such as electric vehicles, green energy and other areas of advanced manufacturing.
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The US and Europe are concerned that Chinese policymakers are driving overcapacity in manufacturing in a bid to boost growth, which they say is raising the risk of dumping on export markets.
Beijing has rejected western warnings about overcapacity as protectionism, while state media have said it is part of a US plot to contain China’s development.
Xi is due to embark on a trip next week to meet European leaders including French President Emmanuel Macron. The EU has instigated a series of anti-subsidy and other investigations into Chinese goods and producers in recent months.
Beijing has set an economic growth target for this year of 5 per cent and a meeting of the Communist party politburo this week is expected to examine the state of the economic recovery.
After strong first-quarter gross domestic product data that showed the economy was on track to meet China’s annual growth target, few expect the meeting to result in robust stimulus measures.
Goldman Sachs said before the PMI data release that “high frequency indicators such as steel demand showed muted growth in April”, adding that it expected a drop in construction stemming from adverse weather in southern China this month.
Non-manufacturing PMI, which includes construction and services, was 51.2, lower than analysts’ median forecast of 52.3 and down from 53 in March.
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