- In April, China's official manufacturing PMI registered at 50.3, a slight drop of 0.1 percentage points from the previous month. The non-manufacturing business activity index fell by 0.7 percentage points to 49.4, entering the contraction zone.
- The composite PMI output index declined by 0.4 percentage points to 50.1. The macroeconomic recovery momentum shows a dual-track characteristic, with manufacturing maintaining structural resilience while the service industry faces marginal pressure.
- New orders in high-tech and equipment manufacturing stabilized above 53 and 52 respectively. If the non-manufacturing sector continues to face pressure, it is expected that the People's Bank of China (PBOC) may increase the structural liquidity injection.
Data Analysis and Marginal Changes
Data released in April by China's National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) showed that macroeconomic leading indicators exhibit significant structural divergence. The manufacturing sector continued its recovery trend from the first quarter, but the momentum slightly slowed month-on-month. A PMI of 50.3 indicates that the industrial sector, after undergoing concentrated recovery, is now entering a stable phase in output and order pace. In contrast, the non-manufacturing business activity index plunged to 49.4, which is the main factor dragging down the composite PMI to 50.1. This change reflects the reality that the construction and service sectors could face demand pressures at the beginning of the second quarter, and the inherent recovery momentum of the overall macroeconomy still requires further validation.
Continuation of Structural Highlights
Beneath the seemingly steady overall indicators, the trend of structural upgrading within the manufacturing sector remains clear. The demand side shows divergence, with the new orders index stabilizing in the expansion zone for two consecutive months at 50.6, providing foundational support for subsequent production scheduling. More critically, the new orders index for high-tech manufacturing, representing the direction of industrial upgrades, consistently remains above 53 at relatively high levels, while the new orders indices for equipment manufacturing and consumer goods manufacturing also stabilize above 52. This divergence suggests that macro policies aimed at promoting equipment renewal may be playing a supportive role in specific areas, with capital expenditure willingness in advanced manufacturing segments being significantly better than in traditional high-energy-consuming industries.
Policy Toolbox Expectations and Pricing
Faced with the situation of the composite PMI falling to 50.1, expectations for coordinated efforts in fiscal and monetary policies are heating up. A contraction in the non-manufacturing sector typically signifies the potential for marginal slowdown in the rollout of infrastructure projects or resident-end service consumption. If this trend continues through May, macro management departments may accelerate the pace of special bond issuance. Simultaneously, the People's Bank of China (PBOC) is expected to maintain reasonable and ample liquidity management. In the foreign exchange and fixed income markets, long-term government bond yields face downward pressure, and funds might concentrate on rate bonds in the short term, while substantial room for the RMB's appreciation may be constrained by short-term weakness. Market pricing will seek a new balance within this expectation gap.
