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China’s Manufacturing Activity Contracts for Fourth Month

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China’s manufacturing activity has witnessed a contraction for the fourth consecutive month in July, amplifying concerns about the economy’s sluggish recovery. However, this has also raised hopes for more stimulus measures.

Measures to Boost Consumer Spending Unveiled

To stimulate consumer spending, China’s National Development and Reform Commission announced a series of measures on Monday targeting various sectors such as automobiles and real estate.

PMI Figures Show Mixed Results

In July, China’s manufacturing purchasing managers index (PMI) increased slightly to 49.3 from June’s 49.0, surpassing economists’ expectations. However, it remained below the 50 level that indicates a contraction. On the other hand, the non-manufacturing PMI dropped to 51.5 from 53.2 in June, falling short of the estimated 52.8, according to FactSet.

Struggles Amid Soft Global Demand

The non-manufacturing reading for July is the lowest this year, indicating that the world’s second-largest economy is struggling to regain growth momentum amidst weak global demand. Deutsche Bank strategist Jim Reid emphasized the challenges by stating that there is a need to revive the growth outlook. However, he also mentioned encouraging stimulus talk, which led to an equity rally in Hong Kong’s Hang Seng Index, rising by 0.8%, and China’s Shanghai Composite climbing 0.5%.

Beijing Pushes for More Stimulus

During a meeting of China’s Communist Party’s Politburo on Friday, Beijing signaled its intention to implement additional stimulus plans to bolster what it termed as a “tortuous” recovery so far.

Positive Growth Picture Creates Opportunity

With an improved growth outlook, UBS chief investment officer Mark Haefele believes that there is a tactical opportunity in Chinese equities. However, he also emphasizes the importance of timely action to capitalize on the better growth picture.

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