China’s factory activity shrank more than initially estimated in July, contracting by the most in two years as new orders fell and dashing hopes that the world’s second-largest economy may be steadying, a private survey showed on Monday. The report followed a downbeat official survey on Saturday which showed growth at manufacturing firms unexpectedly stalled, reinforcing views that the cooling economy needs more stimulus even as it faces fresh risks from a stock market slump.
Fears of a full-blown market crash have added a new sense of urgency for policymakers in Beijing, with many analysts expecting more support measures to be rolled out within weeks. The final, private Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) dropped to 47.8 in July, the lowest since July 2013, from 49.4 in June.
That was worse than a preliminary “flash” reading of 48.2 and marked the fifth straight month of contraction, as indicated by a reading below 50. New orders reversed into contraction last month after growing in June, while factory output shrank for the third consecutive month to hit a trough of 47.1, a level not seen in more than 3-1/2 years.
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