Chinese factory activity sinks in July, weighing on weak economy: Survey

Chinese manufacturing's recovery from anti-virus shutdowns faltered in July as activity sank, a survey showed on Sunday, adding to pressure on the struggling economy in a politically sensitive year when President Xi Jinping is expected to try to extend his time in power.

Factory activity was depressed by weak global demand and anti-virus controls that are weighing on domestic consumer spending, according to the national statistics agency and an official industry group, the China Federation of Logistics and Purchasing.

A monthly purchasing managers' index issued by the Federation and the National Bureau of Statistics retreated to 49 from June's 50.2 on a 100-point scale on which numbers below 50 indicate activity declining. Sub-measures of new orders, exports and employment declined.

Downward pressure is great, said economist Zhang Liqun in a statement issued by the Federation. The impact of the epidemic is still on the rise.

The ruling Communist Party has stopped talking about this year's official economic growth target of 5.5 per cent after output shrank in the three months ending in June compared with the previous quarter.

The slowdown, which raises the risk of politically volatile job losses, adds to challenges for Beijing ahead of a ruling party meeting in October or November when Xi is expected to try to break with tradition and award himself a third five-year term as party leader.

An announcement on Thursday by party leaders promised to strive to achieve the best results but avoided mentioning the annual growth target announced in March.

The party has promised tax rebates and other aid to help entrepreneurs after anti-virus controls temporarily shut down Shanghai and other industrial centres starting in late March.

The port of Shanghai, the world's busiest, says activity is back to normal, but factories and other companies are operating under anti-virus controls that limit their workforces and weigh on production.

An index of production tumbled to 49.8 from June's 52.8. New orders declined 1.9 points to 48.5. New export orders lost 2.1 points to 47.4.

Chinese leaders have avoided large-scale stimulus spending, possibly for fear of reigniting a rise in debt that they worry is dangerously high.