Chinese Manufacturing activity contracts for 4th straight month in July  

Manufacturing activity in China has contracted for a fourth straight month in July, according to Monday’s data, as the country’s leading economic engines progressively struggle with weak demand and limited private spending.

According to the dataobtained from the National Bureau of Statistics, the official manufacturing purchasing manager’s index (PMI) was at 49.3 in July, higher than the expected 49.2 and last month’s reading which was at 49.0, media reports quoted.

A PMI below 50 indicates contraction, as manufacturing activity has constantly shrunk for four months. Despite this, the reading indicates an improvement in comparison to the past few months.

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Despite the removal of anti-COVID regulations in January, industrial activity, one of the main drivers of the China’s economy, has remained weak this year.

Due to the sluggish international demand, the sector is dealing with a significant slowdown in worldwide demand. Local demand has also be affected due to declining capital and retail expenditure.

The demand for manufactured goods has been hindered by weaknesses in China’s real estate market, which has also had an impact on the country’s overall economy.

This was reflected in the non-manufacturing PMI, which dropped from 53.2 in the previous month to 51.5 in July, and the composite PMI, which dropped from 52.5 to 51.1.

July’s PMI readings were weak as the data released in the previous month indicated that economic growth in China had significantly slowed down in the second quarter.

However, this downward growth pattern has raised hopes for additional government motivated programs to provide incentives to boost growth.

Despite the unfavourable PMI results, Chinese markets rose on Monday and the Yuan strengthened as well.

Markets were mostly focused on the country's upcoming announcement of additional incentive programs, which are scheduled for Monday. Over the past week, Chinese markets have sharply risen on expectations of increased policy assistance from Beijing.

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