San Francisco Frontiers - China announces consumption-boosting measures as data disappoints

Official figures released Monday showed factory activity contracting for the fourth straight month in July, adding to a run of dismal economic data that has ramped up calls for government support measures.

A sluggish job market and general uncertainty over the future mean consumer confidence is low.

China's State Council released on Monday a 20-point plan to increase consumption across the board, touching on housing, culture and tourism, as well as green consumption such as electric vehicles.

The measures aim to increase the supply of subsidised rental accommodation and try to solve other problems around housing, particularly for young people.

Once a driving force behind the economy, a crisis in the real estate sector means many developers are now fighting for their survival, exacerbating a crisis of confidence among potential buyers.

The State Council also said it would support the expansion of large-scale festivals and sporting events both on and offline, as well as an increase in spending on services involving catering and healthcare.

Infrastructure in rural areas will be improved to boost digital and green consumption, it added.

Officials told reporters they would "unleash consumption potential by optimising policy and institutional design" in the second half of the year.

- PMI contracts again -

Earlier on Monday the official manufacturing purchasing managers' index (PMI) -- a key measure of factory output -- came in at 49.3, below the 50-point mark that separates expansion and contraction, according to the National Bureau of Statistics (NBS).

July's reading was slightly higher than June's 49.0 figure and was better than forecasted in a Bloomberg survey.

"The overall level of manufacturing prosperity continued to improve," NBS statistician Zhao Qinghe said in a statement.

The non-manufacturing PMI, which measures business sentiment in the services and construction sectors, fell to 51.5 in July from 53.2 in June, as activity in capital market services and real estate shrank.

"The data release showed mixed messages," Zhiwei Zhang, an analyst at Pinpoint Asset Management, wrote in a note, adding "it seems the economic momentum is still quite weak".

China this month said its economy grew 6.3 percent in the second quarter, much weaker than the 7.1 percent predicted in an AFP survey of analysts.

The country's top leaders, known as the Politburo, have warned that the economy faces "new difficulties and challenges" as well as "hidden dangers in key areas".

Zhao also pointed to a low volume of overseas orders, describing a "complicated and severe external environment" and lacklustre demand as major challenges for Chinese manufacturers.

In June, exports dived 12.4 percent, their biggest decline in three years, according to customs figures.

"The Politburo meeting acknowledged the challenge the economy faces," said Zhang, the analyst.

"The key issue is what policies will be launched after the meeting and how effective they will be."

C.Williams--SFF