(Yicai) May 6 -- Activity in China’s manufacturing and services sectors expanded at a slower pace last month, mainly as a result of escalating trade tensions with the United States, according to a widely-watched survey that polls small and private businesses.

The Caixin services purchasing managers index came in at 50.7 for April, down from 51.9 in March and the lowest in seven months, according to data released today by financial media group Caixin. The figure has stayed above the boom-bust line of 50 for 28 consecutive months.

The Caixin manufacturing PMI fell to 50.4 from 51.2, the lowest since January, Caixin announced on April 30. That was the seventh straight month of expansion. As a result, the Caixin composite PMI dropped to 51.1 from 51.8.

“Expansion of supply and demand in the manufacturing and services sectors slowed in light of the China-US trade conflict, with exports in the former under greater pressure,” said Wang Zhe, a senior economist at Caixin.

The non-manufacturing PMI published by the National Bureau of Statistics, which focuses on large, state-owned enterprises, dropped to 50.1 last month from 50.3, while the manufacturing PMI was 49, sliding into contraction territory from 50.5 in March.

“With a cloud over the market outlook, both business and consumer confidence are subdued, making it harder to boost domestic demand,” Wang noted. “The ripple effects of the ongoing China-US tariff standoff will gradually be felt in the second and third quarters.

“Policymakers should prepare well and take action sooner rather than later,” he said.

“The US tariff hikes took a toll on external demand, with new export orders declining at the fastest rate since July 2023, leading to just a marginal increase in total new orders in April,” Wang noted.

“The impact of the tariffs on the supply side, however, was relatively limited,” he added. “Manufacturers continued to absorb existing orders, keeping the gauge measuring output in expansionary territory for the 18th consecutive month.

“China saw a strong start to the year in the first quarter, with key macro indicators surpassing market expectations, showing that incremental and existing policies continued to do their work,” Wang pointed out. 

China’s gross domestic product expanded 5.4 percent in the first quarter from a year earlier, outstripping expectations along with a number of other economic gauges, NBS figures showed on April 16, thanks to broad supportive measures.

“However, there are still many unfavorable factors for economic development, especially the impact on businesses stemming from the uncertainties over the global trade environment,” Wang noted.

Editor: Futura Costaglione