China factory activity contracts in July, signalling fresh pressure on growth

China's official factory activity slipped into contraction in July after five months of expansion. The weaker PMI reading highlights mounting pressure on growth despite export support and fresh promises to spur consumption.China's factory activity unexpectedly slowed in July, with the official manufacturing purchasing managers' index falling to 49.2 from 50.3 in June, the first contraction in five months, according to the National Bureau of Statistics. The reading was weaker than economists had expected and pointed to fresh pressure on growth in the world's second-largest economy.The latest factory data adds to signs of strain in the wider economy, which grew at its slowest annual pace in more than three years in the April-June quarter at 4.3 per cent. While strong exports, especially in technology-related products such as semiconductors and electric vehicles, have supported growth, economists expect China to keep relying on exports as its leaders also promise steps to boost domestic consumption.The sub-index for new orders fell to 48.5 in July, its lowest level since 2023, from 51.2 in June. The production sub-index also dropped to 49.9 from 51.4. PMI readings are based on surveys of factory managers and measured on a scale of 0 to 100, with a reading above 50 showing expansion and below 50 indicating contraction."The latest (PMI) reading remains an unpromising start to the first wave of economic data for the second half of the year," Lynn Song, chief economist for Greater China at ING Bank, said in a commentary. According to Capital Economics, weak domestic demand for goods, including in construction activity, contributed to the weaker PMI figures, while several typhoons that hit China in July may also have disrupted manufacturing. China's economy has been under pressure from weak domestic spending and investment, as a prolonged downturn in the property sector has hurt consumer confidence. Intense competition for jobs has also made workers more cautious about spending. At the same time, countries including the US have complained about excess industrial capacity in China, from solar panels to cars, backed by heavy state subsidies, saying this has driven a surge in exports as domestic demand slows. Beijing has rejected those claims.But China's economic model still favours productivity through its policy preferences, Gary Ng, a senior economist at French bank Natixis, said. Chinese leaders also pledged to boost domestic consumption at a meeting of the ruling Communist Party's decision-making Politburo on Thursday. Taken together, the July factory data underlines the challenges facing China's economy even as exports continue to provide support. With PTI Inputs- EndsPublished By: India Today Web Desk Published On: Jul 31, 2026 10:00 IST