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Danielle Popov

Frank Chen

Factory activity in China remained in contraction for a fourth consecutive month in August, adding to the headwinds facing the world’s second-largest economy.
The official manufacturing purchasing managers’ index (PMI) – a survey of sentiment among factory owners – stood at 49.1 in August, down from a reading of 49.4 in July, the National Bureau of Statistics (NBS) said on Saturday.
The reading fell short of a survey by Bloomberg, which had predicted a slight increase to 49.5.
A reading above 50 typically indicates an expansion of economic activity, whereas a reading below implies a contraction.
“China’s economic momentum likely weakened recently. The fiscal policy stance remains quite restrictive, which may have contributed to the subdued economic performance,” said Zhang Zhiwei, chief economist of Hong Kong and Shanghai-based Pinpoint Asset Management.
“To achieve an economic stabilisation, fiscal policy stance needs to be much more supportive,” he added.
Within the official manufacturing PMI, the new manufacturing export order subindex stood at 48.7 in August, compared with a reading of 48.5 in July.
But Zhang warned that with the US economy slowing, exports might not be as reliable as a source for growth as they were in the first half of the year.
Elsewhere, the non-manufacturing PMI – a measure of sentiment in the service and construction sectors – stood at 50.3 in August compared to 50.2 in July.
The reading exceeded the Bloomberg survey, which had predicted a slight fall to 50.1.


The gauge remained in expansion territory for the 20th straight month.
Within the non-manufacturing PMI, the construction subindex stood at 50.6 from 51.2 in July, while the services subindex stood at 50.2 from 50 in July.
China is struggling with overall sluggish economic momentum, with its economy growing by a slower-than-expected 4.7 per cent in the second quarter.
On Wednesday, UBS cut its growth forecast for China’s 2024 gross domestic product growth from 4.9 per cent to 4.6 per cent due to a weak property market and sluggish domestic demand.
“We expect policies to become more supportive in the rest of 2024. What could come next includes faster fiscal spending, slightly more government bond issuance, a modest expansion in equipment and durable goods upgrade and trade-in and a little more monetary easing,” said Wang Tao, chief China economist at UBS.
Meanwhile, China’s official composite PMI – which tracks both the services and manufacturing sectors – stood at 50.1 from 50.2 in July.
Senior NBS statistician Zhao Qinghe attributed the overall PMI drop in August to hot weather, rain and flooding in mainland China as well as a summer lull in production in some industries.
“There were dips in production and sales for a big swathe of manufacturing businesses in August, and demand is relatively weak,” Zhao said.
August’s sweltering weather meant a slack month for sectors such as rubber and plastic products and ferrous metal plants, but it was favourable for food, alcohol and drink makers, according to an NBS analysis.
Zhao also noted a widening gulf in performance between large manufacturers and smaller ones, as the PMI subindex for the former remained slightly above 50 in August while business activities of small producers continued to languish in contraction with their subindex at 46.4, down from July’s reading of 46.7.
On a positive note, the transport, telecommunications and sport and entertainment sectors thrived – with readings above 55.


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China’s official manufacturing purchasing managers’ index (PMI) stood at 49.1 in August, down from a reading of 49.4 in July


China’s official manufacturing purchasing managers’ index (PMI) stood at 49.1 in August, down from a reading of 49.4 in July.


China economy

China manufacturing