China’s manufacturing sector has been shrinking for three months in a row, with July showing a slight decrease compared to June. Despite the government’s efforts to boost the economy, demand remains weak. The demand index for July was 49.4, down from June’s 49.5. This index, reported by the National Bureau of Statistics, is at its lowest point in five months and is below the 50-point mark that separates growth from contraction.
Experts believe that recent policy changes aimed at increasing business confidence have not yet shown positive effects. Zhao Qinghe, a senior statistician, mentioned several reasons for the decline, including seasonal production slowdowns, insufficient market demand, high temperatures, floods, and extreme weather conditions in some areas.
The construction sector is also experiencing a downturn. The growth index for non-manufacturing business activity fell by 0.3 points to 50.2, the lowest since November. This indicates that infrastructure spending is no longer as effective in offsetting the decline in property construction. Ng, from a U.K.-based research consultancy, noted that this suggests a weakening impact of infrastructure spending on the overall economy.
According to a report, China’s Gross Domestic Product (GDP) grew by 4.7 percent in the second quarter of this year. This growth fell short of the authorities’ target of “around 5 percent” for the whole year. The downturn is largely due to a slump in the property market and insufficient domestic demand.
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In response, China has announced measures to help the economy following a significant meeting in Beijing known as the Third Plenum, which concluded in July. The central bank cut two key policy interest rates to increase financial support for the real economy. One of the rates adjusted was the seven-day reverse repo rate, now set as the primary policy rate.
Despite these measures, total retail sales of consumer goods only rose by 2.0 percent last month, marking the slowest pace since December 2022. Additionally, investment in the property market dropped by 10.1 percent during the first half of the year, and home prices continue to fall in cities across the country. This data was released earlier this month, as reported.
China’s economy is facing challenges from weak demand and a struggling property market, despite government efforts to stimulate growth. The coming months will be critical in determining whether these efforts will have a positive impact.
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