China's economic state seems "fragile" amid double blow - AJ Bell

(Alliance News) - AJ Bell's Russ Mould on Thursday said the situation in China "feels fragile given the continued dismal news", with property developer Country Garden facing a crunch vote, as well as the manufacturing sector deteriorating for a fifth straight month in August.

Meanwhile, Richard Hunter, head of markets at interactive investor, said "China remains the area of both focus and concern".

On Thursday, in China, the Shanghai Composite closed down 0.6%, while the Hang Seng index in Hong Kong closed 0.7% lower.

The economic outlook in China seemed gloomy on Thursday, following new data from the country's National Bureau of Statistics that showed its manufacturing sector remained in contraction in August.

The manufacturing purchasing managers' index rose to 49.7 points in August from 49.3 points in July. Falling below the 50.0 point no change mark, it shows that the sector remained in contraction this month.

The figure was ahead of FXStreet-cited market consensus of 49.4 points, however.

Meanwhile, the non-manufacturing PMI fell to 51.0 points in August from 51.5 points the previous month. The figure was below FXStreet-cited consensus of 51.1.

"China's economic weakness has again been exposed in the latest manufacturing data, indicating attempts to stimulate consumption have fallen short. Factories have been churning out fewer goods again in August as demand wanes, marking the fifth month in a row of contraction," Hargreaves Lansdown analyst Susannah Streeter said.

However, AJ Bell's Mould notes that for those "looking for a bright spot in the factory data, at least it is contracting a little slower than had been forecast."

Its not just the PMI data which is rising eyebrows in China, though.

Streeter continued: "Warnings from the Chinese property giant Country Garden that it may default on its mountain of debt isn't helping sentiment, amid worries problems in real estate will cause contagion in the financial sector."

China's biggest developer Country Garden now faces a crunch vote on extending debt repayment terms that could determine whether it defaults, plunging the country's property market deeper into turmoil.

The firm has racked up debts of more than USD150 billion and this week reported a record CNY48.9 billion - around USD6.7 billion - loss for the first six months of the year.

Creditors have until 2200 CST, or 1500 BST, to decide on a proposal to postpone this payment, according to Bloomberg.

By Sophie Rose, Alliance News reporter

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