China's official manufacturing Purchasing Managers' Index (PMI) recorded at 50.6 in May, slightly below experts' forecast of 51.0 polled by Reuters, but it still falls in the expansion territory. It's the third straight month in which the country has seen factory output rise, as the economy continues to recover from the coronavirus led lockdown.

Among the enterprises surveyed by the National Bureau of Statistics (NBS), 81.2 percent have reached more than 80 percent of the normal production level in May.

The May manufacturing Purchasing Managers Index and the non-manufacturing Business Activity Index remained above 50-point mark that separates growth from contraction, of which the manufacturing PMI index slightly decreased by 0.2 percentage points from April, and the Non-manufacturing Business Activity Index hiked by 0.4 percentage points hitting 53.6. The composite PMI output index remained unchanged from the previous month at 53.4.

The new orders index reached 50.9, an increase of 0.7 percentage points from the previous month said Zhao Qinghe, NBS senior statistician. Among the 21 industries surveyed, 12 industries had new orders index higher than last month, indicating that the related domestic market demand has improved, he added.

Business confidence improved, indicated by the expected index of production and operating activities of manufacturing enterprises reaching 57.9, increased by 3.9 percentage points from the previous month. The expected index of production and operating activities in manufacturing in sectors like food, wine, petroleum processing, and automobiles exceeded 60 percent. "Related companies are generally optimistic about the industry's development trend in the next three months," Zhao commented on the data.

He cautioned that the import and export index is still low as foreign market demand continues to shrink due to the grim and complex situation caused by the pandemic. NBS data showed that this month's manufacturing new export order index and import index were 35.3 and 45.3 respectively. "Although rose by 1.8 and 1.4 percentage points respectively from the previous month, they were still recorded at historically low levels," said Zhao.

Wen Tao, an analyst with the China Logistics Information Center, cautioned about the slow recovery in market demand.

"Survey shows that the proportion of companies that report insufficient orders stands at 54.6 percent, a decrease of 3.1 percentage points from the previous month, but still resides at a high level," Wang wrote in a note.

Business activity in the construction industry is picking up, with its index hitting 60.8, while the service industry is in steady recovery with the index reaching 52.3, Zhao said.

About 91 percent of China's small and medium-sized enterprises had resumed operation as of May 18 after disruptions caused by COVID-19, said Huang Libin, spokesperson for the Ministry of Industry and Information Technology, at a press conference on May 20.