China's factory activity extends declines, firming case for stimulus

China's manufacturing activity fell for a fourth straight month in July, albeit at a slower pace, an official factory survey showed on Monday, reinforcing the need for further policy support to boost domestic demand.

The official purchasing managers' index (PMI) was at 49.3 from 49.0 in June, according to data from the National Bureau of Statistics, staying below the 50-point mark that separates expansion from contraction. The outcome also just beat a forecast of 49.2.

The world's second-largest economy grew at a slow pace in the second quarter, as demand remained weak at home and abroad, leading the Politburo - a top decision-making body of the ruling Communist Party - to describe economic recovery as "tortuous."

President Xi Jinping said China would achieve its annual development targets, state media reported last week. However, analysts warn the country could miss its modest 2023 growth target of around 5 per cent for a second year in a row should the economy lose any more momentum.

China will implement macro adjustments to the economy "in a precise and forceful manner" and strengthen counter-cyclical adjustments, as the government sticks with prudent monetary policy and pro-active fiscal policy, the Politburo was quoted as saying last week.

Many analysts say policymakers are unlikely to deliver any aggressive stimulus due to worries about growing debt risks. They attribute the recent absence of any major announcements to a lack of urgency and a struggle to come up with appropriate policy ideas.

The official non-manufacturing PMI dropped to 51.5 from 53.2 in June, while the composite PMI, which includes both manufacturing and non-manufacturing activity, fell to 51.1 from 52.9.