China’s manufacturing activity has continued to contract for the fifth consecutive month in August, according to an official survey released on Thursday. This has put pressure on Chinese officials to provide support to boost economic growth due to soft demand both domestically and internationally.
Although the official purchasing managers’ index (PMI) rose slightly from 49.3 in July to 49.7 in August, it remained below the crucial 50-point level that indicates contraction. However, there were some positive signs, as new orders showed expansion for the first time in five months, and factory owners reported improved producer prices for the first time in seven months.
Despite this, the services sector continued to decline, indicating ongoing challenges for the Chinese economy. China’s major manufacturing rivals, such as Japan and South Korea, also reported significant declines in output.
Analysts believe that it may still be possible for China to experience an uptick in growth activity in the third quarter if incoming stimulus measures start to take effect. However, there are concerns about mounting debt risks, which make it unlikely for drastic stimulus actions to be implemented.
To address the economic challenges, China has recently announced measures such as halving stock-trading stamp duties and approving guidelines for affordable housing. Some state-owned banks will also reduce interest rates on existing mortgages, although analysts predict that home prices will not show any growth this year.
Policymakers in China are under pressure to boost domestic demand as the global economy continues to slow down. Weak global demand has led to a sixth consecutive month of contracted new export orders.
The non-manufacturing PMI, which includes service sector activity and construction, fell from 51.5 in July to 51.0 in August, mainly due to the ongoing decline in services activity. The composite PMI, which considers both manufacturing and non-manufacturing activity, saw a slight increase from 51.1 to 51.3.
Analysts believe that the strengthening of policy measures is gradually offsetting short-term factors that have disrupted China’s economic consolidation and recovery. The actual implementation and effectiveness of policy support will be crucial indicators to watch moving forward.
As China continues to navigate economic challenges, it is essential for officials to find ways to support growth and boost domestic demand amidst weak global conditions.