China's factory activity moderated slightly in May, with the official purchasing managers' index holding at the determining point between contraction and expansion after two straight months of growth, reinforcing analysts' calls for more targeted policy support to shore up domestic demand and sustain growth momentum.

With some countercyclical measures already in place and ample policy space still available, the world's second-largest economy remains well-positioned to consolidate the recovery as midyear approaches, analysts said.

The assessment came as data from the National Bureau of Statistics showed on Sunday that China's PMI for the manufacturing sector in May stood at 50.0 — the threshold between expansion and contraction — despite edging down 0.3 percentage point from April.

According to Wang Qing, chief macroeconomic analyst at Orient Golden Credit Rating International, the marginal pullback was mainly driven by softer market demand during the month.

The subindex for production stood at 51.2 in May, easing 0.3 percentage point from April but remaining above the 50-point mark, while the new orders gauge edged down 0.7 percentage point to 49.9, suggesting some moderation in market demand, the NBS said.

Wang said the gap between production and new orders remained notable in May, as earlier export resilience helped to support factory output while domestic demand remained in recovery mode. "This points to a continued imbalance between external and domestic demand," he added.

Beneath the headline moderation, new growth drivers continued to gather strength. High-tech manufacturing, for instance, posted a PMI reading of 52.9 in May, while equipment manufacturing recorded a PMI of 52.1, both outperforming the overall manufacturing sector, the NBS reported.

Huo Lihui, a statistician with the bureau, said the PMI for high-tech manufacturing, in particular, had remained above the threshold line for 16 consecutive months, highlighting the increasingly prominent role of new growth drivers as related industries maintained sound growth momentum.

Wen Tao, an analyst at the China Logistics Information Center, said the strength of such sectors was partly supported by resilient external demand, as the rapid development of artificial intelligence continued to inject momentum.

However, Wang from Orient Golden Credit Rating International warned that export resilience could face more tests in the coming months, as the prolonged conflict in the Middle East weighs on global growth and adds to external uncertainties.

To better cushion such headwinds in the second half of the year, Wang said that macro policies may introduce additional support in due course to boost household consumption, accelerate infrastructure investment and stabilize the real estate market. "There is still ample policy room in these areas," he said.

Looking ahead, manufacturing activity is likely to improve modestly in June, with the sector expected to remain in mild expansion, said Wen from the China Logistics Information Center.

Analysts said the latest data suggested that some structural divergence remained. New growth drivers continued to support factory output while domestic demand required further strengthening, underscoring the need to unlock consumption potential as a key growth driver.

Mao Zhenhua, chief economist at China Chengxin International Credit Rating Co, said that pressure remains on small and medium-sized enterprises and household consumption. "Policymakers should make stronger efforts to expand domestic demand, and further unleash the potential of private investment and household consumption," Mao added.

Zhang Bin, deputy director of the Chinese Academy of Social Sciences' Institute of World Economics and Politics, called for "stronger countercyclical policy support".

He said that fiscal policy should ensure that public spending grows faster than nominal gross domestic product, while monetary policy should focus on lowering real interest rates to send stronger signals for investment and home purchases, thereby activating endogenous growth momentum.