China's factory activity expanded for a second straight month in April, according to an official survey on Thursday, demonstrating economic resilience even as the Iran war drives energy prices higher and threatens global supply chains.
The official manufacturing purchasing managers index slipped slightly to 50.3 from 50.4 in March, according to the National Bureau of Statistics, better than what economists had expected. Measured on a scale between 0 and 100, a reading above 50 reflects expansion. The new orders sub-index slowed to 50.6 from 51.6 in March, although the sub-index on production rose slightly to 51.5.
Export Demand and Green Technology Drive Growth
Higher oil prices have so far not weighed on industrial activity in China, Leah Fahy, senior China economist at Capital Economics wrote in a research note this week, and the recent acceleration of industrial activity appears to have been driven by strong export demand. Surging oil prices also are driving up global demand for green technology, a boon for Chinese companies that dominate manufacturing of clean energy equipment, she wrote.
A private sector PMI survey by S&P Global and RatingDog, a Chinese credit research and analysis firm, was more upbeat. It showed China's factory activity rose to 52.2 in April, up from 50.8 in March. The survey focuses more on smaller and export-focused private companies.
Trade Relations and Economic Outlook
U.S. tariffs on China have been lowered after a Supreme Court ruling earlier this year against U.S. President Donald Trump's sweeping tariffs. That means China's exports to the U.S. could pick up in coming months, Fahy said. A long planned visit to Beijing by Trump to meet with Chinese leader Xi Jinping next month may help extend a year-long trade truce reached between the two leaders late last year.
China's economy expanded at a 5% annual pace in January-March, accelerating from the previous quarter and beating economists' estimates. Chinese leaders have set a 4.5% to 5% economic growth target for 2026, the lowest since 1991.
Domestic Challenges Persist
A prolonged property sector slump has weighed on domestic investment and consumption although exports remain robust, with China recording an all-time high of $1.2 trillion trade surplus last year. The contrast between strong export performance and weak domestic demand underscores the uneven nature of China's economic recovery, with manufacturing workers and export-oriented industries benefiting while households face continued pressure from the property crisis.
The manufacturing data reveals how China's industrial workforce continues to drive production growth even as domestic consumers struggle with the fallout from the property sector collapse. While factory output rises, the benefits have not translated into stronger domestic consumption, highlighting persistent inequality between China's export sector and its consumer economy.
Why This Matters:
China's continued factory expansion amid global energy shocks demonstrates the resilience of its manufacturing sector and export-driven economy, but also reveals structural imbalances that leave ordinary households behind. While Chinese workers produce record exports and dominate green technology manufacturing—critical for global climate action—domestic consumption remains weak due to the property crisis. The lowest growth target since 1991 reflects the challenges facing policymakers as they balance export strength against domestic vulnerabilities. For workers and families, the disconnect between manufacturing success and consumer spending power represents an ongoing inequality that requires policy intervention. The global economy's reliance on Chinese manufacturing, particularly for clean energy equipment, means these domestic imbalances have international implications for the energy transition and supply chain stability.