Activity in China’s factory sector shrank at its fastest rate in at least three years in August as domestic and export orders tumbled, hitting global markets and increasing fears that the world’s second-largest economy may be heading for a hard landing.
Even more worrying, China’s services sector, which has been one of the lone bright spots in the sputtering economy, also showed signs of cooling.
Hurt by soft demand, overcapacity and falling investment, China’s economy has been further buffeted by plunging shares and a shock yuan devaluation, in what some have called a “perfect storm” of factors that is rattling global markets and could strain relations with China’s major trading partners.
Manufacturers across Asia struggled last month, a series of surveys showed, denting hopes of a pick-up in the second half of the year as the region tries to fire its traditional growth engine of exports.
The Chinese government’s measure of manufacturing showed activity contracted at the fastest pace in three years, while a survey by Markit, which focuses more on smaller, private firms, showed the factory sector’s weakest performance in 6-1/2 years.
Even China’s services sector, which has been one of the few bright spots in the sputtering economy, showed alarming signs of cooling, expanding at its slowest rate in more than a year, Markit said.