China Factory Activity Beats Forecasts Despite Softening Demand

China's official manufacturing sector maintained its expansionary trend in April, posting a Purchasing Managers' Index (PMI) of 50.3. This figure slightly outperformed the 50.1 projection from Reuters-polled economists, although the pace of growth has decelerated from the previous month's year-high. While the manufacturing data remained positive, other indicators suggest a broader economic cooling. The non-manufacturing PMI contracted to 49.4, down from 50.1 in March, while the composite PMI dipped to 50.1 from 50.5. These figures highlight a divergence between factory output and service-sector activity, driven largely by a softening in new orders. The economic backdrop is further complicated by looming geopolitical tensions. President Xi Jinping and U.S. President Donald Trump are scheduled to meet in May, where Beijing is expected to seek clarity regarding the threat of Section 301 tariffs. This follows a period of volatility where the U.S. administration imposed a global 10% import tariff after previous legal challenges to 'Liberation Day' tariffs. Trade relations remain fragile despite a previous truce reached in Busan, South Korea. That agreement had seen the U.S. reduce the overall tariff rate on Chinese goods to approximately 47%, while Beijing agreed to suspend sweeping export controls on rare earths. Market participants are now looking to the May summit to determine if further concessions or escalations will impact global supply chains.