© Reuters.

Investing.com– Chinese manufacturing activity shrank at a slower-than-expected pace in August, data showed on Thursday, as recent stimulus measures from the government appeared to be bearing some fruit in supporting economic activity. 

The official (PMI) read 49.7 in August, data from the National Bureau of Statistics showed. The reading was more than expectations of 49.5, as well as last month’s reading of 49.3. 

A reading below 50 indicates contraction, with manufacturing activity having now contracted for a fifth consecutive month. But August’s reading showed that activity in the sector was improving, albeit slightly. 

Weakness in the manufacturing sector was driven chiefly by slowing local and overseas demand this year, as economic conditions in China’s biggest trading partners worsened. This was exacerbated by a growing trade tiff with the U.S., as Washington seeks to block China’s access to the latest chipmaking technology.

Non-manufacturing activity grew less than expected in August, with the PMI reading 51.0, weaker than expectations of 51.1 and July’s reading of 51.5. Still, improvement in the manufacturing sector saw China’s – a gauge of overall business activity, rise 51.3 in August from 51.1 in the prior month.

China’s key real estate sector is experiencing a pronounced slowdown, with majors such as Country Garden Holdings (HK:) facing a potential default- an event that could severely rattle faith in the Chinese economy.

Focus is now squarely on more stimulus measures from the Chinese government, as Beijing moves to shore up a slowing post-COVID economic recovery. The government has rolled out a string of monetary stimulus measures to promote spending this year.

But investors have called on more targeted, fiscal stimulus to help support the economy, although the chances of such a move appear to be low, given that China is also struggling with high levels of government debt. 

Analysts said that the government is unlikely to roll out fiscal measures to support the real estate sector, as Beijing seeks to wean the economy off its reliance on the property market. The sector accounts for roughly a fourth of overall Chinese economic growth, and has seen a severe decline over the past three years. 

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