BEIJING (Bloomberg) - China’s factory activity contracted for a fourth straight month in August, the latest sign the world’s No. 2 economy may struggle to meet this year’s economic growth target.
The official manufacturing purchasing managers’ index declined to 49.1 from 49.4 in July, the National Bureau of Statistics said on Saturday. The median forecast of economists surveyed by Bloomberg News was 49.5. The reading has been below the 50-mark separating growth from contraction for all but three months since April 2023.
China’s $17 trillion economy has been struggling as a prolonged property downturn weighs on consumers and businesses. Recent government efforts — including interest-rate cuts — to boost sentiment have yet to turn things around, meaning the economy continues to lean on manufacturing and exports to keep its growth target in sight.
But as trade tensions with the U.S. and Europe increase, headwinds for the manufacturing sector are growing. President Xi Jinping’s government is targeting gross domestic product growth of about 5% this year, goal economists say will need accelerated spending on infrastructure and other programs if it is to be realized.
“The fiscal policy stance remains quite restrictive, which may have contributed to the weak economic momentum,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. “To achieve a economic stabilization the fiscal policy stance needs to be become much more supportive. With the US economy slowing, exports may not be as reliable a source for growth as it was in the first half of the year.”
In a statement accompanying the data, NBS analyst Zhao Qinghe attributed the latest contraction to high temperatures, heavy rainfall and a seasonal slackening of production in some industries.
The non-manufacturing measure of activity in construction and services rose to 50.3, boosted by consumption during the summer holiday season, the statistics office said. That compares with a forecast of 50.1, and a July reading of 50.2. The composite index stood at 50.1.
Economists at banks including UBS Group AG and JPMorgan Chase & Co. expect China to fall short of delivering on its growth target of around 5% this year.
Recent data showed the first contraction of loans to the real economy in nearly two decades, a surprise slowdown in fixed-asset investment and weaker-than-expected exports. Credit demand has remained sluggish as the property downturn and dour job market deter businesses and consumers from spending.