China’s factory activity slides for second straight month

Beijing officials reported on Monday that Chinese factory activity contracted for the second consecutive month in August, according to the latest official data released by the National Bureau of Statistics. The country's manufacturing Purchasing Managers' Index (PMI) stood at 49.8, indicating a contraction rather than expansion, as the PMI of 50 represents a balance between the two.

This figure was slightly lower than the 50 threshold that marks the transition from growth to decline. Despite this contraction, the reading was marginally higher than the 49.5 forecast in a Bloomberg survey of economists and marked an improvement from the 49.2 recorded in July.

The National Bureau of Statistics statistician, Huo Lihui, explained that the data revealed a slight expansion in both production and market demand within the manufacturing sector. However, certain sectors such as steel production and chemical materials experienced weakened market activity. For the non-manufacturing sector, the PMI came in at 49.0, the same as the previous month of July, but fell short of the Bloomberg economists' prediction of 49.4.

Zhiwei Zhang, the president and chief economist at Pinpoint Asset Management, noted that the increase in commodity prices may have benefited some firms in the upstream manufacturing sector through higher input and output price indexes. However, this surge was driven by supply factors rather than increased demand.

China's economy has been bolstered by a sustained boom in exports, and the global artificial-intelligence frenzy has increased demand for its tech products. Despite challenges from trade frictions with Washington and an entrenched property-sector crisis that has unsettled consumers, economists argue that Beijing must pivot toward a growth model reliant more on household consumption than traditional drivers such as infrastructure investment and the real estate market.