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China’s Manufacturing Stabilizes

Operating conditions in China's manufacturing sector deteriorated only marginally in May but the long-term economic situation remains weak, according to HSBC.

BEIJING—China’s manufacturing sector stabilized somewhat in May but the long-term economic situation remains weak, according to private market research.

The latest HSBC China Manufacturing PMI, a monthly study of manufacturing industry data “signaled that operating conditions in China’s manufacturing sector deteriorated only marginally in May.”

The preliminary PMI — a main measure of manufacturing output — was 49.4 for May, up from 48.1 in April. A reading of less than 50 indicates contraction rather than growth, but the HSBC report notes that this data from May are better than previous months this year and new export orders have grown at a rate higher than any of the previous 49 months.

Despite the somewhat positive report, HSBC noted that companies continue to cut jobs in the manufacturing sector and the long-term situation remains weak.

“The rate of reduction was marked overall, and partly driven by company down-sizing policies,” HSBC’s report noted. “Despite lower staffing levels, backlogs of work also declined.”

In addition, domestic demand is “muted,” hence the reason that new export orders are so vitally important to growth in the manufacturing industry.