China rolls out consumption support amid dire new data

China's State Council has issued measures to restore and expand consumption in the automobile, real estate and services sectors after the country's manufacturing activities fell for a fourth straight month in July while the services and construction sectors teetered on the brink of contraction.

The cabinet said the government will improve the infrastructure for charging to promote more purchases of new energy vehicles, support housing demand by expanding the supply of affordable rental housing and encourage tourism by asking local governments to cut admission fees at scenic areas or even make them free during low periods.

Like the measures announced Friday to boost manufacturing in the consumer-goods industries, the latest steps are aimed at improving goods supply in the economy, rather than demand.

The government has refrained from giving cash subsidies to residents, focusing on providing benefits and tax breaks to companies instead.

The new measures were announced after the official manufacturing purchasing managers' index inched up to 49.3 in July from 49.0 in June to stay below the 50-point mark that separates expansion from contraction. The last time that the indicator had pointed to contraction for more than three consecutive months was between May and October 2019, before the pandemic.

The non-manufacturing PMI, which incorporates sub-indexes for service sector activity and construction, dropped to 51.5 from June's 53.2.

Meanwhile, a US-based data provider said Chinese consumers cut back on spending on everything but travel and restaurants last month.

Almost every major sector experienced a weakening in both revenue and profit margins compared with June, led by a steep slide in retail, China Beige Book said. Sales in the travel and food and drinks increased, defying the trend due to continued "revenge spending," the firm said.

Separately, the onshore yuan rose 180 basis points to 7.1465 per US dollar. It has risen 1.6 percent over the past month, ending a three-month dip.

In other news, China announced export controls on some drone-related equipment, saying it wanted to safeguard "national security and interests" amid escalating tension with the United States over access to technology.

The restrictions on equipment including some drone engines, lasers, communication equipment and anti-drone systems would take effect next month, the commerce ministry said.