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

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

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