Yicai:

Looking at leading indicators, the manufacturing PMI declined in May, but prosperity indexes for high-tech manufacturing and equipment manufacturing remained relatively high. How would you evaluate manufacturing production in May, and what is your outlook for the period ahead? Thank you.

Fu Linghui:

Thank you for your question. Manufacturing is the foundation of China's real economy and a key reflection of its industrial competitiveness. China's manufacturing industry has achieved good results over many years of development. So far this year, China's manufacturing industry has maintained generally sound momentum. In May, manufacturing growth remained steady with an upward tilt, continuing to shift toward new growth drivers and an improved structure, and making significant contributions to industrial upgrading and economic growth. Specifically, manufacturing showed several key features.

First, production growth accelerated, with equipment manufacturing making a prominent contribution. In May, the value added of manufacturing enterprises above designated size rose 4.4% year on year, 0.4 percentage point faster than the previous month. Among them, equipment manufacturing made a very prominent contribution to overall manufacturing growth. The value added of equipment manufacturing enterprises above designated size increased 9.5% year on year, 1.2 percentage points faster than the previous month, accounting for nearly 80% of the growth across all enterprises above designated size.

Second, the industrial structure continued to improve, with high-end manufacturing playing a stronger leading role. As the manufacturing sector continued to move toward the medium- and high-end of the industrial chain, the value added of high-tech manufacturing enterprises above designated size climbed 15.1% year on year in May, 2.3 percentage points faster than the previous month. Meanwhile, investment in high-end manufacturing maintained growth, providing sustained impetus for the upgrading and development of the manufacturing sector. From January to May, investment in high-tech manufacturing rose 3.4% year on year.

Third, new growth drivers gained strength, with new types of manufacturing delivering outstanding performance. Driven by digital development, digital product manufacturing has shown strong growth momentum. In May, the value added of digital product manufacturing enterprises above designated size increased 13.9% year on year, 1.9 percentage points faster than the previous month. The rapid development of AI applications has significantly boosted manufacturing. In May, the value added output of the manufacturing of integrated circuits and specialized electronic materials increased 87% and 29%, respectively. The green and low-carbon transition continued to deepen, driving a surge in the output of green products in May: lithium-ion batteries production rose by 40%, bio-based chemical fibers by 18.1%, and carbon fibers and composite materials by 13.4%.

Fourth, revenue and efficiency improved, and business expectations remained generally stable. Industrial production maintained steady growth, product prices rebounded, and both operating revenue and profits of manufacturing enterprises grew relatively fast. From January to April, operating revenue of manufacturing enterprises above designated size increased 5.8% year on year, and profits rose 20.4%. Among them, profits of equipment manufacturing enterprises increased 15.4%, and profits of high-tech manufacturing enterprises rose 44.8%. Improved operating performance helped keep overall business expectations stable. In May, the production index within the manufacturing PMI stood at 51.2%, and the production and business activity expectations index was 53.9%, both remaining in expansion territory.

Overall, the manufacturing sector showed a positive development trend in May, with improved structure and quality, demonstrating strong resilience and vitality in a complex environment. However, the current external environment remains complex and challenging. The impact of international geopolitical conflicts on global energy supply and supply chains is still unfolding, and some domestic enterprises are facing temporary difficulties such as rising costs and insufficient demand. Going forward, we must thoroughly implement the decisions and plans of the CPC Central Committee and the State Council, provide targeted assistance to enterprises in overcoming difficulties, promote industrial upgrading, and consolidate the foundation for the positive development of manufacturing. Thank you.