China’s manufacturing sector faced a significant setback in April, with the Purchasing Managers’ Index (PMI) dropping to 49, below the threshold of 50 that indicates contraction. This decline was attributed to the escalating trade tensions between China and the United States, as US tariffs on Chinese goods surged to as high as 145 percent, prompting retaliatory measures from Beijing.
The services sector also experienced a slight dip in April, with the non-manufacturing PMI slipping to 50.4 from 50.8 the previous month. Economists expressed concerns about the impact of the trade conflict on business investment, consumer prices, and the possibility of a global recession.
In an effort to avoid the incoming US tariffs, Chinese exports saw a notable increase of over 12 percent in the previous month as companies rushed to ship goods before the new charges took effect. However, the effects of the trade war were evident in the disappointing manufacturing data for April.
Despite efforts to stimulate the economy through measures such as interest rate cuts and relaxation of housing market restrictions, China’s post-Covid economic recovery remains fragile. Weak domestic demand and ongoing challenges in the property market continue to pose obstacles to growth.
Chinese authorities have set ambitious targets for job creation and economic growth, aiming to create 12 million urban jobs in 2025 and maintain a growth target of 5 percent for the year. However, analysts are skeptical about the feasibility of these targets, especially in the face of the current economic challenges.
The outlook for China’s economy remains uncertain, with external factors like the trade war and global economic slowdown adding to the existing domestic challenges. Despite the government’s efforts to support growth, including fiscal stimulus measures, the road to recovery may be long and arduous.
