China’s manufacturing activity contracts amid trade tensions

China’s manufacturing activity contracted for a second month in May, an official survey showed on Saturday, raising expectations for more stimulus to support the economy amid a protracted trade war with the United States.

The official purchasing managers’ index (PMI) rose to 49.5 in May from 49.0 in April, improving slightly but remaining below the 50-mark separating growth from contraction, and was in line with a median forecast of 49.5 in a Reuters poll.

The new orders sub-index rose to 49.8 in May from 49.2 in April, while the new export orders sub-index rose to 47.5 from 44.7.

The non-manufacturing PMI, which includes services and construction, fell to 50.3 from 50.4, remaining above the 50-mark separating growth from contraction.

Earlier this month, the central bank unveiled a raft of easing steps, including interest rate cuts and a major liquidity injection, and analysts believe a trade deal with the United States could reduce the need for more aggressive stimulus.

Beijing and Washington have agreed to a 90-day pause under which both sides would cut their import tariffs, raising hopes of easing tensions, but investors worry negotiations will be slow amid persistent global economic risks.

U.S. President Donald Trump on Friday accused China of violating the bilateral deal to roll back tariffs and announced a doubling of worldwide steel and aluminum tariffs to 50%, once again rattling international trade.

China’s economy expanded at a faster-than-expected pace in the first quarter, and the government has maintained a growth target of around 5% this year, but analysts fear U.S. tariffs could shift momentum sharply lower.

Exports beat forecasts in April, buoyed by demand for materials from overseas manufacturers who rushed out goods to make the most of President Trump’s 90-day tariff pause.