China's factory activity was flat in May, an official survey showed, as weak domestic demand and higher production costs weighed on the manufacturing sector.
The official manufacturing PMI dropped to 50 from 50.3 in April, straddling the 50-mark separating growth from contraction. Economists had forecast a reading of 50.
Supply improved while demand weakened. The production sub-index was 51.2 and new orders 49.9.
Weakness in property, employment and consumer spending continues to dampen growth. China relies on global demand to absorb its goods.
The government has vowed to address the supply-demand mismatch and set a less ambitious GDP target for 2026.
The war in the Middle East has sent energy prices surging, squeezing manufacturers' profits.
A summit between Chinese and US leaders did not extend the trade truce, but they agreed to explore tariff cuts on $30 billion worth of goods.
High-tech and equipment manufacturing outperformed, while high-energy-consuming industries contracted.
The non-manufacturing PMI rose to 50.1 from 49.4.
