Domestic demand engine for growth

China's manufacturing activity fell to a nine-month low in August as domestic firms struggled with economic troubles at home and abroad.

Recent HSBC data show that China's purchasing managers' index, which gauges national manufacturing activity, hit 47.8 in August, its lowest score since November 2011. According to international practice, a PMI reading of above 50 indicates economic expansion and a reading below 50 indicates contraction. What's more, the country's preliminary manufacturing output index declined from 50.9 to 47.9 in July, also showing a five-month low, as indicated by the British banking company's data.

In August, the number of export orders received by China hit a 41-month low, dragging down the month's manufacturing figures and suggesting that the external demand for Chinese manufactured goods has declined greatly.

The August PMI figure came as no surprise. In general, China's broad economic indicators have declined considerably since the second quarter of this year. From the first half of 2011 to the first half of this year, for instance, the growth rate of its gross domestic product fell below 8 percent, a figure the Chinese government has long tried to keep GDP growth at or above. The second quarter, in particular, saw the country's economy grew by 7.6 percent, its lowest rate in more than three years. Important economic data released earlier this month for July, including those for foreign trade, industrial output and retail sales, all pointed to persistent weakness in the world's second largest economy. The continuing decline in GDP growth is a sign that China's economy is losing momentum.

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