China Manufacturing PMI Contracts for Fourth Consecutive Month... "Need to Unveil Economic Stimulus Measures"

China's manufacturing Purchasing Managers' Index (PMI) has remained in a 'contraction' phase for four consecutive months. As the economic recovery is delayed more than expected, calls are growing for the Chinese authorities to introduce additional stimulus measures.

[Image source=Reuters Yonhap News]

China's National Bureau of Statistics announced on the 31st that the manufacturing PMI for July was recorded at 49.3. Although it slightly increased compared to the previous month (49.0) and experts' forecast (49.2), it did not rise above 50, which indicates an expansion phase. Thus, China's PMI has remained in a contraction phase for four consecutive months since falling below 50 at 49.2 in April.

The non-manufacturing PMI, including construction and agriculture, recorded 51.5, continuing the expansion phase. However, this was below both the previous month (53.2) and Goldman Sachs' forecast (53).

The deterioration of the manufacturing PMI reflects the ongoing weakness in China's export-driven manufacturing sector due to the global economic downturn. Additionally, weakening growth in the service sector, which is a major source of employment, along with slowing consumer spending, sluggish exports, and a liquidity crisis in real estate, have hampered growth. As a result, China's second-quarter gross domestic product (GDP) grew by only 0.8% compared to the previous quarter. The youth unemployment rate in China reached a record high of 21.3% in June.

Erin Shin, China economist at HSBC Bank, said, "The PMI figures indicate that there is still no significant turning point in economic recovery activities," adding, "This places the responsibility on policymakers to act swiftly and provide more policy support." Regarding the July PMI contraction, she analyzed, "(The economic conditions) could continue to weigh on jobs and consumption, delaying a full recovery."

Accordingly, voices calling for the Chinese government to introduce additional stimulus measures to boost the economy are growing louder. Recently, Chinese authorities have introduced various measures to stimulate household consumption and other initiatives to revive the economy, but these have yet to show significant effects. Some are expressing doubts about whether China will achieve its 5% growth target for this year. In response, the Chinese government expressed its determination to stimulate the economy at the Politburo meeting of the Communist Party Central Committee on the 24th.

Robert Carnell, Head of Asia-Pacific Research at ING Bank, stated, "There must be a continuous hope that the government will pull out cards capable of revitalizing the economy to quell this situation," but added, "However, I am not entirely confident that there is a financial 'bazooka' (rocket launcher) powerful enough to ignite the economy."

This content was produced with the assistance of AI translation services.