BEIJING, April 30 (Reuters) – China’s factory activity expanded for a second straight month in April, as manufacturers cranked up production to ship goods early to buyers worried the Iran war will further inflate costs, sending new export orders to their strongest level in two years.
But the escalating Middle East conflict is laying bare risks in the $20 trillion economy’s production-led growth model, with higher energy prices likely to deter fresh orders once stockpiling fades, even as Chinese exporters enjoy a short-lived boost.
The official manufacturing purchasing managers’ index (PMI) dipped to 50.3 from 50.4 in March, but held above the 50-mark separating growth from contraction, according to a survey by the National Bureau of Statistics (NBS). It beat a median forecast of 50.1 in a Reuters poll.
The PMI survey’s sub-index for production expanded at a slightly faster pace while new export orders rose to 50.3, the highest since April 2024, from 49.1 in March. The sub-index for raw material stockpile rose but remained in contraction.
“It will be interesting to see if the official trade data will confirm the resilience of exporters in coming months,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, noting that the PMI data showed the manufacturing sector was still displaying resilience to external shocks.
“The outlook of the export sector is very important for China’s economy, as domestic demand has been weak,” he added.
The overall new orders sub-index fell to 50.6 from 51.6, suggesting that factories are still having better luck with overseas buyers than their home market.
Han Bing, who has managed a warehouse in Dongguan in the southern province of Guangdong serving plastics producers since 2018, said business was “booming” as factories rushed to stockpile supplies to avoid potential price hikes.
“Although China is not short of oil, there is an overall shortage in the chemical sector, and factories are nervous about future demand,” he said. “This caused widespread stockpiling on a large scale – every factory wants to stock up.”
Input prices remain elevated, with the gauge for raw material prices dipping only slightly to 63.7 from 63.9 in March, the NBS survey showed. But the reading for output prices dropped to 55.1 from 55.4, suggesting manufacturers’ continued weakness in pricing power.
Price indexes in petroleum, coal and other fuel processing sectors as well as chemicals sectors stayed above 70 for two consecutive months, NBS statistician Huo Lihui said.