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Chinese manufacturing activity shrank for a fifth straight month in August, an official survey showed, adding to pressure on policymakers in the world’s second-largest economy to act to boost growth.

The country’s Manufacturing Purchasing Managers Index for the month was 49.7. A reading below 50 indicates contraction compared to the previous month. The non-manufacturing PMI was 51, covering services and sectors such as agriculture and construction.

A string of disappointing data has fueled concerns about China’s economy, with a widely expected rebound in early 2023 following the lifting of Covid-19 restrictions failing to fully materialize.

China’s real estate sector, which typically accounts for more than a quarter of the overall economy, has slowed sharply due to a two-year liquidity crisis, while weak global consumption has also weighed on China’s previously booming exports. Consumer prices fell year-on-year in July for the first time since early 2021.

While Thursday’s manufacturing figure remained below expansionary territory, it was slightly higher than last month’s 49.3 reading and topped forecasts of analysts polled by Reuters. In contrast, non-manufacturing data came in below expectations.

Sheana Yue, China economist at Capital Economics, said the data showed “a slight improvement in economic activity in August,” but noted that “overall economic momentum remains weak and more policy support is needed.” to avoid another slowdown later this year.”

Beijing has set its lowest annual growth target in decades at 5 percent and has taken cautious steps to support the economy. Policymakers have been looking to boost still-sluggish consumption, but have refrained from any major stimulus. Authorities last week unexpectedly kept the five-year core lending rate on hold amid concerns that further rate cuts would put pressure on the banking system.

This week, Guangzhou and Shenzhen eased mortgage conditions for first-time buyers, a move that could help a property sector hit by dozens of defaults, construction delays and a drop in transactions.

Country Garden, China’s largest private developer, missed a bond payment this month and disclosed a $7 billion first-half loss on Wednesday. The defaulted payment by Zhongrong, a major Chinese investment firm, has raised concerns that the housing crisis could spread to savings products in China.

Goldman Sachs analysts pointed to a reading above 55 for services such as transportation, accommodation, restaurants, sports and entertainment in the non-manufacturing survey, which they said “suggests that activity in other services such as real estate may have deteriorated further in August”.

Chinese stocks fell on Thursday after the latest PMI data, with the CSI 300 down 0.6% and the real estate sub-index down more than 4%.

Additional reporting by Hudson Lockett in Hong Kong

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