Activity in China’s Manufacturing Sector Contracts for Fifth Straight Month
Pressure on Policymakers to Take Action
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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.
- 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.
- 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.
- 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.
Impact on Chinese Stocks
- Chinese stocks fell following the latest PMI readings.
- CSI 300 index down 0.6% and real estate sub-index sliding more than 4%.
Additional reporting by Hudson Lockett in Hong Kong