China faces renewed pressure for stimulus as PMI dips to 6-month low

Factory gate prices reach lowest level in 14 months.

China's manufacturing sector is facing challenges as factory activity hit a six-month low in August, according to an official survey released on August 31.

Weakening factory gate prices and a struggle for orders are putting pressure on policymakers to focus on providing more stimulus to consumers.

The National Bureau of Statistics' Purchasing Managers' Index fell to 49.1 in August from 49.4 in July, marking the sixth consecutive decline and the fourth month below the 50 threshold that separates growth from contraction. This figure was below the median forecast of 49.5 in a Reuters poll.

In response to the slowdown in the world's second-largest economy, policymakers are considering shifting their focus from infrastructure projects to providing stimulus to households.

Manufacturers are facing challenges due to a prolonged property crisis that is dampening domestic demand, as well as potential restrictions on exports to Western countries.

Additionally, factory gate prices reached their lowest level in 14 months, dropping to 42 from 46.3 in July. New orders and new export orders remained negative, and many manufacturers have stopped hiring.

Some experts, like Zhiwei Zhang, chief economist at Pinpoint Asset Management, believe that the current fiscal policy is too restrictive and that a more supportive approach is needed to stabilize the economy.

With the U.S. economy slowing down, reliance on exports for growth may not be as viable as it was earlier in the year.

Policy advisers are considering the possibility of Beijing increasing bond issuance earlier than expected if economic growth does not show signs of improvement by October.