In May, China's factory activity stagnated as indicated by the official purchasing managers' index (PMI), which fell to 50 from 50.3 in April. This stagnation reflects the manufacturing sector's struggle with weak domestic demand and increasing production costs. The National Bureau of Statistics (NBS) reported that sub-indexes for production and new orders were 51.2 and 49.9, respectively, while raw material stockpiles dropped to 48.6. The situation is exacerbated by ongoing issues in the property market, employment, and consumer spending, which have dampened growth prospects. Furthermore, the ongoing conflict in the Middle East has driven up energy prices, impacting manufacturers' profit margins. While high-tech and equipment manufacturing showed resilience with PMIs of 52.9 and 52.1, other sectors, particularly those consuming high energy, faced contraction. The Chinese government is responding by setting a more conservative GDP growth target for 2026 to facilitate necessary reforms and address the supply-demand imbalance.