An official survey released on Thursday showed that China's manufacturing activity contracted for the fifth consecutive month in August. Amid weak domestic and international demand, the latest data suggest that pressure to boost China's economic growth continues to intensify.
Data from the National Bureau of Statistics shows that China's official Purchasing Managers' Index (PMI) rose from 49.3 in July to 49.7, although higher than the market expectation of 49.4, the index has remained below the expansion-contraction threshold of 50 for five consecutive months.
Currently, Chinese authorities are struggling to counteract the impact of a deteriorating real estate market, weak consumer spending, and a significant downturn in credit growth, prompting major financial institutions to lower their economic growth forecasts for China this year. Some financial institutions have indicated that, as the world's second-largest economy, China might not meet the government's set annual growth target of around 5%.
Louise Loo, a senior economist at Oxford Economics, stated that although weakness in China's real estate market, consumer spending, and credit growth has cast a shadow over the economic growth outlook, the latest PMI data indicate that economic activity in the third quarter is still expected to rebound, thanks to stimulus measures that have been or are about to be introduced.
Recently, the Chinese government announced a series of stimulus measures, including halving the stamp duty on stock transactions, easing mortgage loans for first homes, and lowering mortgage rates. In addition, China has introduced a series of measures to boost the consumption of bulk commodities, especially new energy vehicles. However, many analysts point out that the possibility of China launching large-scale stimulus measures remains low due to concerns over rising government and private sector debt risks.
Data from the National Bureau of Statistics also showed that the Non-Manufacturing PMI, which includes the service and construction sectors, fell from 51.5 in July to 51.00 in August. The composite PMI, which includes both manufacturing and non-manufacturing sectors, rose from 51.51 in July to 51.3.
Frederic Neumann, Chief Asia Economist and Co-Head of Asian Economic Research at HSBC, pointed out that increasing evidence suggests non-manufacturing activity is decelerating. To prevent further slowdown in overall economic growth, the government needs to introduce more stimulus measures to curb the worsening trend in both the non-manufacturing and manufacturing sectors.
