Rapid Improvement in China’s Manufacturing Sector Continues, but Input Costs and Labor Remain Challenging

In April, the manufacturing sector in China showed continued improvement, with both supply and demand expanding rapidly. This growth exceeded analysts’ expectations and represented the fastest pace since February 2023. The number of new export orders from China last month increased at the fastest pace in 3.5 years, boosted by items such as cars, machinery, and electrical equipment.

According to Wang Zhe, a senior economist at Caixin Insight Group, the manufacturing sector saw continued improvement in April. Transportation and logistics systems operated smoothly, contributing to the overall positive outlook for the sector. The official PMI from China’s National Bureau of Statistics also showed growth, with the index at 50.4 points in April compared to 50.8 in March.

Both PMI surveys highlighted rising input costs and competition as challenges for manufacturers. Zhao Qinghe of the NBS noted that while demand for products in industries such as automobiles, machinery, and electrical equipment was strong, manufacturers were facing higher costs of raw materials like metals and crude oil. This has led to businesses reducing prices to attract orders and showing caution in hiring more workers.

Despite increased purchases and inventory levels reflecting positive sentiment among businesses, the labor market has not seen improvement. An ongoing decrease in job numbers was attributed to restructuring efforts and resignations. As input costs remain high and selling prices low, manufacturers are experiencing a squeeze on profits