China’s Manufacturing Activity Contracts in August, Signaling Economic Slowdown

Activity, August, Chinas, Contracts, Economic, Manufacturing, Signaling, Slowdown

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Activity in China’s Manufacturing Sector Contracts for Fifth Straight Month

Pressure on Policymakers to Take Action

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Introduction

Activity in China’s manufacturing sector contracted for a fifth straight month in August, according to an official survey, adding pressure on policymakers in the world’s second-largest economy to take action to shore up growth.

Manufacturing PMI

The country’s manufacturing purchasing managers’ index was 49.7 for the month.
A reading of below 50 indicates contraction compared with the previous month.

Non-Manufacturing PMI

The non-manufacturing PMI, which covers services and industries such as agriculture and construction, was 51.

Concerns about China’s Economy

A series of disappointing data has fueled concerns about China’s economy.
Anticipated rebound following the lifting of Covid-19 restrictions has failed to fully materialize.

Factors Affecting China’s Economy

China’s property sector has slowed due to a two-year liquidity crisis.
Weaker global consumption has weighed on the country’s export sector.
Consumer prices in July fell year on year for the first time since early 2021.

Data Analysis

Manufacturing data slightly higher than last month’s reading of 49.3.
Non-manufacturing data disappointed expectations.
Economic momentum remains weak and more policy support is needed.

Beijing’s Economic Growth Target

Beijing has set its lowest economic growth target in decades, at 5% for the full year.
Cautious steps have been taken to support the economy.
Boosting consumption and avoiding major stimulus.

Property Sector and Bond Payments

Cities of Guangzhou and Shenzhen eased mortgage conditions for first-time buyers.
Country Garden, China’s biggest private developer, missed bond payments and disclosed losses of $7bn in the first half of the year.
Missed payments at Zhongrong have sparked fears of a crisis in real estate.