UOB economist Ho Woei Chen assesses China’s latest PMIs, noting a positive outlook for manufacturing supported by strong AI-related export demand and robust industrial profits, while domestic demand and services weaken. The report highlights contained overall price pressures but elevated input costs, and sees limited near-term scope for rate cuts despite room for modest policy easing later in 2026.

Manufacturing resilient as services underperform

"China’s official PMIs indicate that the outlook has stayed positive for the manufacturing sector in Apr with limited spillovers so far from the war in Iran as strong AI-related demand continues to drive robust growth in exports. However, domestic demand softened ahead of the Labour Day holidays. Overall price pressure also appeared to be contained although raw materials and producer prices stayed elevated in the manufacturing sector."

"The CFLP manufacturing PMI stayed in expansion (reading>50) for the second straight month at 50.3 in Apr (Bloomberg est: 50.1, Mar: 50.4). The positive outlook is supported by a strengthening in the private sector RatingDog China manufacturing PMI to 52.2 (Bloomberg est: 51.0, Mar: 50.8) – the fifth straight month of expansion and the highest since Dec 2020."

"The CFLP non-manufacturing PMI contracted at a sharper than expected pace by 0.7pt to 49.4 in Apr (Bloomberg est: 49.8, Mar: 50.1), led by weaker new orders and new export orders while business expectations improved from Mar. Both the services index (49.6 from 50.2 in Mar) and the construction index (48.0 from 49.3 in Mar) slipped. The contraction in the selling price index deepened (48.1 from 49.9 in Mar) in signs of relatively soft demand."

"Overall, China’s industrial sector presented a positive outlook with earlier data showing industrial profits rising 15.5% y/y in 1Q26 (Mar: 15.8%, Jan-Feb: 15.2%), supported by recovering producer prices. However, this was uneven, reflecting improvements in industries such as non-ferrous metals (copper, aluminum, nickel), chemicals and telecoms but profits continued to fall in industries including pharmaceuticals, motor vehicles and general-purpose equipment manufacturing in Mar."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)