China’s manufacturing activity contracted for a fifth straight month in August, according to an official survey, underscoring persistent pressures on the world’s second-largest economy. The official Purchasing Managers’ Index (PMI) edged up slightly to 49.4 from July’s 49.3 but remained below the 50-mark that separates growth from contraction. The reading also missed a Reuters poll forecast of 49.5, suggesting producers are cautious amid uncertain export prospects and sluggish domestic demand.
The economy is facing a confluence of challenges, including weakening exports due to U.S. tariffs, a severe property sector downturn, and rising job insecurity. These are compounded by heavily indebted local governments and recent extreme weather events. Economists warn that these mounting pressures threaten to derail Beijing’s ambitious annual growth target of “around 5%.”
In a modest bright spot, the non-manufacturing PMI, which encompasses the services and construction sectors, showed a slight acceleration. The index rose to 50.3 in August from 50.1 the previous month, indicating a marginal expansion. This resulted in a composite PMI, which combines both manufacturing and non-manufacturing activity, reading of 50.5, up from 50.2 in July.
According to Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, China’s economic momentum has clearly slowed in the third quarter. The data points to a recovery that remains fragile and uneven, heavily reliant on the service sector to counterbalance the prolonged weakness in factory output and a cooling property market that continues to drag on broader growth.
