China’s factory activity slides for second straight month

China's manufacturing activity slowed in August for the second consecutive month, official figures revealed on Monday, as reduced demand hampers the world's second-largest economy. The National Bureau of Statistics reported the manufacturing purchasing managers' index (PMI) at 49.8, just below the 50 point that indicates a shift from expansion to contraction. Despite this, the reading exceeded the 49.5 expectation from a Bloomberg survey of economists and marked an improvement from July's 49.2.

However, the data showed a decline in market demand for steel production and chemical materials. The non-manufacturing PMI, which gauges activity in services and construction, remained at 49.0, unchanged from July but falling short of the Bloomberg forecast of 49.4. Huo Lihui, an NBS statistician, noted that weak activity in wholesale, retail, and capital market services also contributed to the figures.

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, suggested that the surge in commodity prices may have benefited certain firms in the upstream manufacturing sector, as both input and output price indexes increased last month. However, Zhang emphasized that this growth is driven by supply rather than demand.

China's economy has been buoyed by a sustained export boom and the global artificial-intelligence craze, which has increased demand for its tech products. Yet, with challenges mounting in other regions, economists argue that Beijing must transition towards a model driven more by domestic consumption than by traditional growth pillars such as infrastructure investment and property.