China's factory activity contracted in April, reversing a recent positive trend, according to official data released on Wednesday, which Beijing attributed to a "sharp shift" in the global economy, as it continues to fight a mounting trade war with the United States.
Punishing U.S. tariffs, which have reached 145% on many Chinese products, took effect in April, while Beijing responded with new 125% duties on imports from the U.S.
The impact of the measures began to show through in April, with the Purchasing Managers' Index (PMI) – a key measure of industrial output – falling to 49.0 in April, according to the National Bureau of Statistics (NBS), below the 50-point mark that separates growth and contraction.
The reading for April was down from March's 50.5, the highest in 12 months, and represented a steeper decline than the 49.7 forecast in a Bloomberg survey.
"In April, affected by factors such as a high base from earlier rapid manufacturing growth and a sharp shift in the external environment, the manufacturing PMI fell," NBS statistician Zhao Qinghe said in a statement.
The non-manufacturing PMI, which measures service sector activity, came in at 50.4, down from 50.8 in March.
Economists have warned that the disruption in trade between the tightly integrated U.S. and Chinese economies could threaten businesses, increase prices for consumers and cause a global recession.
Chinese exports soared more than 12% last month as businesses rushed to get ahead of the swingeing tariffs.
"The weak manufacturing PMI in April is driven by the trade war," Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, wrote in a note.
"The macro data in China and the U.S. will weaken further ... as the trade policy uncertainty delays business decisions," he added.
China's economy, the world's second-largest, has struggled to recover since the COVID-19 pandemic began and is also grappling with sluggish domestic demand and a protracted property sector crisis.
"China's economy is coming under pressure as external demand cools," said Zichun Huang, China Economist at Capital Economics, in a note.
"Although the government is stepping up fiscal support, this is unlikely to offset the drag fully, and we expect the economy to expand just 3.5% this year," Huang added.
Authorities announced a slew of aggressive stimulus measures last year aimed at boosting growth, including rate cuts and the easing of some home purchasing restrictions.
In March, leaders at a key political meeting pledged to create 12 million new urban jobs by 2025.
They also said they would aim for a 5% growth this year, the same as in 2024, a goal considered ambitious by many economists.
