China Factory and Services Sectors Show Further Weakness

China's manufacturing sector contracted for the fourth consecutive month in July, with the official PMI falling to 49.3, underscoring continued industrial weakness. The decline is driven by both sharply falling new orders and export orders, with businesses bracing for possible higher U.S. tariffs amid persistent trade tensions. Non-manufacturing sectors also slowed, as the services and construction PMI dropped to 50.1, its lowest since November. Policymakers face challenges from overcapacity, a weak property market, and subdued household consumption, while the absence of major new stimulus has weighed on market sentiment and regional stocks. U.S. and Chinese officials are negotiating an extension to the tariff truce, but concerns about industrial deflation and competitive pressures remain. Analysts emphasize the need for stronger policy measures to stabilize growth and support the struggling manufacturing sector.