Hong Kong, Jul 31 (AP) China's factory activity unexpectedly slowed in July, the first such contraction in five months, weighing on the pace of broader growth for the world's second-largest economy.

The official manufacturing purchasing managers index, or PMI, fell to 49.2 from 50.3 in June, China's National Bureau of Statistics said on Friday, worse than what economists had expected.

The sub-index on new orders fell to 48.5 in July — the lowest since 2023 — from 51.2 in June, while the sub-index for production fell to 49.9 from 51.4.

PMI readings, based on surveys of factory managers, are measured on a scale of 0 to 100. A reading above 50 indicates an expansion, and below 50 reflects a 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, a chief economist for Greater China at ING Bank, said in a commentary.

Weakness in domestic goods demand, including in building activity, contributed to the lower PMI figures, according to Capital Economics, while several typhoons that hit China in July may have also disrupted manufacturing.

China's economy has been under pressure from sluggishness in domestic spending and investment, as a years-long weakness in its massive property sector hits consumer confidence. Fierce competition for jobs has left workers worried over spending.

Robust exports, especially in technology-related products such as semiconductors and electric vehicles, have helped boost its overall growth momentum. But those are capital-intensive sectors.

The economy grew at its slowest annual pace in more than three years in the April-June quarter, at 4.3 per cent. That fell short of China's official full-year growth target of 4.5 per cent to 5 per cent.

Countries including the US have also complained about excess industrial capacity in China, from solar panels to autos, supported by heavy state subsidies. They said that's resulting in China's exports surging as its domestic demand slows, with its cheap goods posing a threat to many economies.

Beijing has hit back at those claims.

But China's economic model still favours productivity through its policy preferences, said Gary Ng, a senior economist at French bank Natixis.

Economists expect China to continue to rely on exports to support its economic growth for the rest of the year.

Chinese leaders have also pledged to boost domestic consumption, including at a meeting of the ruling Communist Party's decision-making Politburo on Thursday. (AP) SKS SKS

Manufacturing contraction highlights weak domestic demand, property-sector pressure and continued reliance on technology-related exports for economic growth. Manufacturing activity in China contracted in July, as the official purchasing managers' index fell below the expansion threshold and new orders and production declined. Weak domestic demand, lower building activity and possible typhoon-related disruptions contributed to the slowdown. Consumer spending, investment and property-sector weakness continue to affect confidence, while technology-related exports support growth. Policy commitments include strengthening domestic consumption amid continued reliance on exports.