New manufacturing PMI data and hopes from May Day holiday rush: What to know
Trump administration officials have also been suggesting that talks are ongoing with China, but as of May 2, there are no details and no clarity. China has been working to cut reliance on the US trade and push domestic consumption, as we reported in our tracker last week. But new data out this week did show some of the inevitable impacts of the US tariffs on Chinese manufacturing.
Meanwhile, Beijing has continued to reach out to other nations. Foreign Minister Wang Yi met Russian counterpart Sergey Lavrov on the sidelines of the BRICS Foreign Ministers' meeting in Rio de Janeiro on Monday (April 28), and spoke of the 'mutual trust and support between China and Russia.'
President Xi Jinping will likely visit Moscow for the May 9 Victory Day parade.
Here's what has happened in China over the past week.
1. THE CURIOUS CASE OF TARIFF TALKS
On Wednesday, a Chinese Foreign Ministry spokesperson said – again – that China and the US were not consulting or negotiating on tariffs.
President Trump had said the opposite at least twice earlier in April, once even claiming, in an interview to Time magazine, that the Chinese President had called him. And that same day, Chinese state broadcaster China Central Television (CCTV) had said that 'the US side has proactively reached out to China through multiple channels, hoping to discuss tariffs'.
Bill Bishop, a longtime China-watcher based in the US and author of the Sinocism newsletter, flagged what else the CCTV report said: 'Unless the US takes substantial action, China has no need to enter into talks. However, if the US wants to engage…China can use this opportunity to observe, and even draw out, the US's true intentions…'
UPSHOT: The conflicting cloak-and-dagger narratives obscure the situation further. China's counter tariff against the US is now at 125%, even though Reuters has reported that a list of exempt US-made products is being drawn up, and companies are being 'quietly notified'. But there is nothing to suggest an overall change of approach from either side.
2. NEW MANUFACTURING DATA SHOW TARIFF IMPACT
Reuters reported that China's factory activity 'contracted at the fastest pace in 16 months in April'. The Purchasing Managers Index (PMI) is based on monthly surveys of purchasing managers of enterprises. A note that accompanied the release pointed to 'sharp changes in [China's] external environment'.
In separate though not unrelated news, state media Xinhua reported that a meeting of the Politburo, among the highest decision-making bodies on political affairs, had noted that 'the fundamentals of China's sustained economic recovery needs to be further consolidated, and the impact of external shocks is rising.'
Other indicators are flashing, too. Bloomberg reported this week that about 40 US-bound cargo ships are currently waiting at ports in China, 40% down from the number of early April. The Guardian reported that China's total e-commerce shipping to the US dropped 65% by volume in the first three months of the year, but rose by 28% in Europe.
UPSHOT: Analysts have said the PMI numbers reflect prevailing negative sentiments, but could be overstating the real impact. But they do point to concerns over trade, and are in line with lowered growth projections for China from the likes of Goldman Sachs.
China has long claimed it will survive the tariff war, in part by turning to its domestic market. But low consumption has been a problem for a while now, and reviving it is easier said than done.
3. THERE WILL BE A NEW AMERICAN IN BEIJING
On Tuesday, Senate confirmed David Perdue, 75, as the US Ambassador to China. A former Republican Senator, Perdue has previously lived in Hong Kong, and held senior positions at companies such as Reebok.
Announcing his pick last year, Trump wrote on Truth Social that Perdue's international business career provided 'valuable expertise to help build our relationship with China', and described him as a 'loyal supporter and friend'.
UPSHOT: The filling of a key diplomatic role is important to improve contacts between countries especially when their relationship is at a low point. A direct line to the White House could help – on tariff and other issues – if and when Beijing chooses to engage.
Labour Day is a holiday in China, but people can take several consecutive days off as long as they work on the weekend before or after.
Labour Day was on Thursday, and the Communist Party mouthpiece Global Times reported that the number of holiday travellers was expected to grow by 8% compared to last year. The average daily highway traffic volume and passenger trips on Shanghai's rail network are projected to rise.
UPSHOT: The Global Times stated, 'The May Day break has long served as a barometer of consumer trends.' China is looking to bolster domestic consumption and project self-reliance; it will be looking for hope in the May Day numbers.
5. COMPETING CLAIMS IN SOUTH CHINA SEA UNDERLINED
Both the Philippines and China have released photos of their flags in the Spratly islands in the South China Sea, at a place the Filipinos call Sandy Cay and the Chinese call Tiexian Reef. The Associated Press said the sandbars where the photos were clicked are near the Philippines-occupied Thitu Island, and Subi Reef, which China has transformed into a base with a military-grade runway and buildings with communications facilities.
UPSHOT: From 2022 onwards, under President Bongbong Marcos, the Philippines has adopted a stronger position against aggressive Chinese claims over the region. Military exercises are currently ongoing between the Philippines and the US, with the participation of more than 14,000 soldiers.
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