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Alice Li

China’s factory activity has slipped into contraction in July, ending a four-month growth streak as weaker new orders and persistent demand challenges highlight the need for further policy support from Beijing, analysts said.
The manufacturing purchasing managers’ index (PMI) fell to 49.2 in July, down from 50.3 in June, according to data released by the National Bureau of Statistics (NBS) on Friday. The reading fell short of the 50.11 projection from economists polled by the financial data provider Wind.
The monthly index measures factory activity through surveys of supply chain managers across a variety of sectors. A reading above 50 indicates expansion, while one below 50 signals contraction.
The new orders subindex, a gauge of manufacturing demand, fell to 48.5 in July from 51.2 in June, while a separate measure for new export orders also slipped into contraction territory, falling to 49.6 this month compared with 50.1 a month earlier.
“Under the combined impact of a high comparison base from recent rapid growth and the traditional off-season in select manufacturing sectors ... factory activity cooled from last month ... [as] both production and market demand eased,” said Huo Lihui, a statistician at the NBS, in a statement.
According to Huo, while hi-tech sectors such as specialised equipment manufacturing remained relatively vibrant – with subindexes for new orders and production both above 53 – industries like ferrous metal smelting and automotives experienced weak supply and demand.
Analysts said the July PMI marked a “sharp fall” and underscored the growing need for Beijing to roll out supportive policies.
“Although the PMI’s correlation with industrial output has weakened in recent years, the latest reading remains an unpromising start to the first wave of economic data for the second half of the year,” said Lynn Song, chief economist for Greater China at ING.


With ex-factory prices remaining in contraction for a second month, falling to 47.8 in July from 48.2 in June, Song noted that China’s reflation trend “could face increasing challenges in the second half of the year if this continues”.
Meanwhile, non-manufacturing PMI, which tracks activity across construction and services, also fell to 49 in July. That marked the lowest level since the pandemic in 2022, Song said, cautioning that it was a “negative sign amid the recent push to unleash the potential of services consumption”.
“The incremental policy easing signalled at the Politburo meeting seems increasingly necessary,” he said.
On Thursday, Beijing pledged to step up macro policy support and enhance the resilience of capital markets for the remainder of the year following a meeting of the Communist Party’s 21-member Politburo, a major decision-making body led by President Xi Jinping.
The party’s upper echelon vowed to accelerate fiscal spending and speed up the transition from old to new growth drivers.
Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, also observed that the manufacturing sector “slowed more than expected”, while the Politburo’s message suggested policymakers would “focus on the quality of growth rather than the speed”.
“The development of the new technology sector is on the top of Beijing’s policy agenda,” he said, adding that the strength of the export sector – crucial to the broader manufacturing industry – would remain a “critically important” factor to watch for the rest of the year.
China’s official composite PMI, which tracks both the manufacturing and non-manufacturing sectors, also dropped in July to 49.3, compared with 50.6 a month earlier.


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Beijing faces renewed pressure to ramp up support as PMI falls to 49.2, a day after leadership signalled it would accelerate fiscal spending


Beijing faces renewed pressure to ramp up support as PMI falls to 49.2, a day after leadership signalled it would accelerate fiscal spending.


China’s manufacturing sector falters in July as growth momentum cools

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Beijing faces renewed pressure to ramp up support as PMI falls to 49.2, a day after leadership signalled it would accelerate fiscal spending

Beijing faces renewed pressure to ramp up support as PMI falls to 49.2, a day after leadership signalled it would accelerate fiscal spending