China’s manufacturing sector has contracted for the fourth straight month, according to the latest data from the National Bureau of Statistics. The manufacturing Purchasing Managers’ Index (PMI) fell to 49.2 in August, down from 49.5 in July. This decline indicates a contraction in manufacturing activity, as a reading below 50 represents a decrease.
Analysts had expected a decline, but at a slower rate of 49.5. The contraction is a concern for China’s economy, which has been experiencing a brief and less robust recovery post-COVID. While some sectors, such as tourism and the auto industry, have regained strength, others like real estate, a key growth driver, are struggling.
In contrast, the non-manufacturing PMI, which includes services, remained in positive territory at 50.3 points, up from 50.2 in July. This suggests that the services sector is still expanding, albeit at a slow pace.
China’s economic slowdown is attributed to various factors, including a decline in demand for bank loans, which contracted for the first time in nearly 20 years in July. The government has implemented measures to boost growth, but the impact has been limited so far.
The contraction in manufacturing activity is a challenge for China’s growth model transition. The country is shifting from being the world’s workshop for cheap products to becoming essential for future hi-tech industries, including artificial intelligence. However, this transition is proving to be a difficult task.
The latest economic indicators, released in mid-August, were deemed disappointing, highlighting the need for further measures to stimulate growth. The government is under pressure to revive the economy, which is facing headwinds from both domestic and external factors.
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