China’s Manufacturing Sector Declines for Third Month in a Row
China’s manufacturing sector has experienced a decline for the third consecutive month as of July, with demand remaining weak despite recent government efforts to stimulate the world’s second-largest economy. The demand index for July stands at 49.4, slightly lower than June’s 49.5, as announced by the National Bureau of Statistics on Wednesday. The latest PMI, a five-month low, remains below the 50-point mark that separates growth from contraction.
Experts attribute the loss of growth momentum to recent policy changes aimed at boosting business confidence. Zhao Qinghe, a senior statistician, cited “the impact of off-season production, insufficient market demand, high temperatures, floods, and extreme weather in some areas” as factors contributing to the decline. A similar dip was observed in the construction sector. Additionally, the growth index for non-manufacturing business activity dropped by 0.3 points to 50.2, the lowest since November.
“This suggests that infrastructure spending may no longer be providing as effective an offset to the downturn in property construction as it was previously,” said Ng from the U.K.-based research consultancy. According to a Nikkei Asia report, China’s Gross Domestic Product (GDP) grew 4.7 percent in the second quarter of this year, falling short of the expectations of authorities, who aimed for a whole-year target of “around 5 percent.” This downturn is attributed to a slump in the property market and insufficient domestic demand.
China has announced measures to help the economy, following a recent meeting known as the Third Plenum, which concluded in Beijing in July. As a result, China’s central bank cut two key policy interest rates to “step up financial support for the real economy,” including setting the seven-day reverse repo rate as the primary policy rate. However, total retail sales of consumer goods rose only 2.0 percent last month, the slowest pace since December 2022. Similarly, investment in the property market dropped by 10.1 percent during the first half of the year, while home prices continue to fall in cities across the country, according to data released earlier this month.
Doubts Revealed
Manufacturing Sector -: The manufacturing sector includes businesses that produce goods in factories, like cars, clothes, and electronics.
Demand Index -: The demand index measures how much people want to buy goods. A number below 50 means demand is low.
National Bureau of Statistics -: This is a government agency in China that collects and reports data about the economy, like how much stuff is being made and sold.
Non-manufacturing Business Activity Index -: This index measures the activity in services like banking, retail, and real estate. A number above 50 means the sector is growing.
Interest Rate Cuts -: This means the government lowers the cost of borrowing money to encourage people and businesses to spend more.
GDP Growth -: GDP stands for Gross Domestic Product, which is the total value of all goods and services produced in a country. Growth means the economy is getting bigger.
Property Market -: This refers to buying and selling buildings and land. A slump means fewer people are buying or selling.
Domestic Demand -: This is the desire for goods and services within a country. Low domestic demand means people in the country are not buying much.
