China’s factory activity slides for second straight month

Beijing, Aug 31 — China's factory activity contracted in August for the second straight month, according to official data released today. Despite the decline, the manufacturing purchasing managers' index (PMI) remained above the critical 50 mark, indicating a slight expansion. The PMI stood at 49.8 in August, just below the 50-line separating growth from contraction.

Although this figure was slightly lower than the 49.5 prediction made by economists in a Bloomberg survey, it marked an improvement from the 49.2 recorded in July. Huo Lihui, a statistician from the National Bureau of Statistics (NBS), stated that the reading signified "expansion in both production and market demand in the manufacturing sector," although certain sectors, including steel production and chemical materials, witnessed "weak market activity."

The non-manufacturing PMI, which gauges activity in other areas such as services and construction, came in at 49.0, unchanged from July but falling short of the Bloomberg forecast of 49.4. Huo added that "weak" activity was observed in wholesale, retail, and capital market services, all of which fell below the critical point. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, suggested that the rise in commodity prices might have benefited some firms in the upstream manufacturing sector due to increased input and output price indexes.

However, Zhang noted that this growth was driven by supply rather than demand. China's economy has been bolstered by a historic boom in exports, which has remained robust in recent months. The global artificial-intelligence frenzy has also driven up demand for China's tech products. Given the potential economic challenges looming elsewhere, economists argue that Beijing must pivot towards a model fueled more by household consumption than traditional growth drivers like infrastructure investment and property.