China factory activity softens despite government stimulus measures

China’s factory activity softened in April, official data showed on Tuesday, in the latest sign that the world’s second-largest economy remains on uneven footing despite a raft of government stimulus measures. The Purchasing Managers’ Index (PMI), a key gauge of factory conditions, came in at 50.1 for the month, down from 50.5 in March, the National Bureau of Statistics said.

The reading is below analyst forecasts but remains above the 50.0 level separating expansion from contraction.

“The latest survey data disappoint hopes for a further recovery,” said Julian Evans-Pritchard of Capital Economics.

“The official PMIs suggest that (the second quarter) got off to a weaker start and reinforce our view that there are still some downside risks to near-term activity,” he said in a note.

Growth in factory activity from last month and new orders softened, while raw material inventories declined.

Tepid global demand and a trade war with Washington that has seen tariffs slapped on more than $360 billion in goods has weighed on China’s manufacturing sector.

The new export and import orders sub-index rose from March, but remained in contraction territory.

Beijing has announced a raft of stimulus to cushion the impact from its cooling economy, with spending on roads, railways and other big-ticket infrastructure projects picking up early this year, and tax cuts worth 2 trillion yuan (USD 297 billion) kicking in this month.

Economic growth in the first quarter stabilised at 6.4 percent.

NBS analyst Zhao Qinghe credited government policy for improving small business conditions.

“It shows that a series of precise and effective tax and fee reduction policies and measures have gradually appeared to support the healthy development of small and micro enterprises,” Zhao said in a statement.

Data from independent data provider Caixin released Tuesday also showed growth in China’s factory activity softening from last month.

The figures come as top US trade negotiators arrive in Beijing later Tuesday for the latest round of negotiations aimed at resolving the thorny issues riling relations between the world’s top two economies.