China’s Manufacturing Sector Activity Disappoints for Fourth Consecutive Month

China’s manufacturing sector continued to shrink for the fourth consecutive month in July, raising concerns about the health of the world’s second-largest economy. Despite the implementation of new measures aimed at boosting economic growth, the official ‘Manufacturing Purchasing Managers Index (PMI)’ released by the National Bureau of Statistics (NBS) remained below the critical 50-point threshold that separates expansion from contraction.

The July PMI reading came in at 49.3, indicating a contraction in manufacturing activity. While there was a modest improvement compared to the previous month, officials remain cautious as economic challenges persist. The construction activity also experienced a slight uptick from June, but overall growth remains moderate.

NBS statistician Zhao Qinghe acknowledged that the overall level of manufacturing prosperity is showing signs of improvement, but challenges persist. China’s economic recovery from the impacts of the Covid-19 pandemic has been slower than expected, leading to a slowdown in consumer spending.

The non-manufacturing PMI, which measures business sentiment in the service and construction sectors, also declined in July to 51.5 percent, down from 53.2 percent in June. The contraction in the capital market services and real estate activities is believed to be responsible for this decline.

In response to disappointing economic data in recent months, Chinese officials unveiled a 20-point plan to boost consumption. The plan includes additional support for housing demand, culture and tourism sectors, and green consumption, such as electric vehicles.

Earlier this month, China reported an economic growth rate of 6.3 percent for the second quarter, falling short of the 7.1 percent forecast by analysts. The country’s top leaders have cautioned that the economy faces “new difficulties and challenges” and “hidden threats in key sectors.”

Zhao emphasized the challenges posed by the low level of foreign demand and described the external environment as “complex and serious.” Weak demand continues to be a primary challenge for Chinese manufacturers.

As the Chinese government navigates through these economic challenges, analysts and policymakers are closely monitoring the situation, hoping that the measures taken will revitalize economic growth and stability in the coming months.