China's factory activity contracts in May, but there are signs of improvement

Key Points

• PMI rose to 49.5 in May from 49.0 in April, marking a slower contraction in China’s factory activity despite remaining below the 50 expansion threshold.
• Under the recent US-China deal, US tariffs were cut from 145% to 30% for 90 days and China reduced its taxes on US goods from 125% to 10%, though rates remain above pre-trade war levels, creating uncertainty over the truce’s durability.
• Exporters with US business reported an accelerated resumption of foreign trade orders and improved import-export conditions following the tariff concessions.
• Trade tensions flared as President Trump declared he would no longer be “Mr. NICE GUY” with China and moved to revoke visas for Chinese students, prompting Beijing to lodge a formal protest.

BEIJING (AP) — China’s factory activity contracted in May, according to an official survey released on Saturday, although the decline slowed from April as the country reached a deal with the U.S. to slash President Donald Trump's sky-high tariffs.

China's purchasing managers index rose from 49.0 in April to 49.5 in May, the National Bureau of Statistics said. PMI is measured on a scale from 0 to 100, where 50 marks the cutoff between expansion and contraction.

Meanwhile, the manufacturing index showed growth in the sector, although the index measuring new orders remained under 50 despite some improvement.

National Bureau of Statistics senior statistician Zhao Qinghe said some companies with U.S. business reported accelerated resumption of foreign trade orders, and there was an improvement in import and export conditions.

The U.S.-China deal, reached earlier this month, cuts Trump's tariffs from 145% to 30% for 90 days, creating time for negotiators from both sides to reach a more substantive agreement. China also reduced its taxes on U.S. goods from 125% to 10%.

But the remaining tariffs are still higher than they were before Trump took office, and businesses and investors face uncertainty about whether the truce will last.

Trump said Friday that he will no longer be “Mr. NICE GUY” with China on trade, declaring in a social media post that the country had broken an unspecified agreement with the United States.

He later said in the Oval Office that he will speak with Chinese President Xi Jinping and “hopefully we’ll work that out,” while still insisting China had violated the agreement.

Over the past week, tensions between Beijing and Washington also intensified after the U.S. said it would start revoking visas for Chinese students studying in the country. China has lodged a protest with the U.S. over the matter, calling the decision unreasonable.