Manufacturing activity across China’s private sector companies rose at the fastest rate seen so far this year during the month of May, buoyed by an improvement in both domestic as well as external demand. The Caixin China General Manufacturing PMI picked up to 52 in May from 51.9 in April, the highest reading seen since December 2020 and beating economists’ forecast for a reading of 51.9.

The increase was powered by a sharp rise in new orders while export orders grew at the fastest pace seen since last November. However, manufacturing output dipped slightly since April, possibly on the back of rising input costs, with its sub-index touching the highest level seen since December 2016.

With demand outpacing supply, Chinese manufacturing firms saw their inventories decline across both pre and post production goods. Hiring activity remained mostly unchanged since April as companies remained cautious about hiring more staff when facing challenges from higher input costs.

Senior economist at Caixin Insight Group, Dr. Wang Zhe, observes, “To sum up, manufacturing expanded in May as the post-epidemic economic recovery kept its momentum. Both domestic and overseas demand were strong and supply recovered steadily. The job market remained stable. Manufacturers stayed confident about the business outlook as the gauge for future output expectations was higher than the long-term average. Inflation was still a crucial concern as prices continued rising.”