China manufacturing expansion slows in July

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A Chinese worker sprays lacquer on steel in a factory in Rizhao, Shandong province. Photo: Agence-France Presse

China’s manufacturing activity faltered in July, official data showed on Monday, as experts warn of a slowdown in the world’s second largest economy.

China registered steady growth during the first half of the year, with stronger-than-expected GDP and exports growth, but the positive momentum will be hard to maintain as the country looks to adopt stricter financial regulations aimed at controlling the country’s debt-fuelled investments.

The latest purchasing managers’ index (PMI), a gauge of factory conditions, came in at 51.4 in July, the National Bureau of Statistics (NBS) said, down from the 51.7 reading in June.

Anything above 50 is considered growth while a figure below points to contraction. Analysts surveyed by Bloomberg News had expected a reading of 51.5.

Expansion in supply and demand has slowed due to extreme weather across the country, with intense heat and flooding in some areas hindering manufacturing activity, NBS analyst Zhao Qinghe said in a statement.

“July’s PMI signals a slight softening of the manufacturing sector,” Raymond Yeung of Australia & New Zealand Banking Group Ltd. told Bloomberg. “External demand will likely drop in the summer, and third quarter GDP growth isn’t expected to hit 6.9 percent.”

“China’s growth momentum may have waned at the start of Q3,” Julian Evans-Pritchard of Capital Economics said in a note. “We anticipate further weakness ahead as the crackdown on financial risks weighs on credit expansion and economic growth.”

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