What's going on?

Here�s a new wrinkle in China�s once smooth recovery: data out on Wednesday showed China�s manufacturing activity shrank in August for the first time since April 2020.

What does this mean?

It looks like China�s economy is finally losing steam after having outperformed its rivals� during the pandemic: a widely followed manufacturing activity survey � which asks factory managers how busy they�ve been compared to the month before � showed activity in Chinese factories shrank for the first time since the early stages of the pandemic. And it�s not the country�s first sign of trouble: China�s also contending with weaker export demand, soaring prices for raw materials, and a slowing property sector � all of which are hampering economic activity (tweet this).

Why should I care?

For markets: Chinese stocks are losing fans.
Several investment banks have recently cut their growth forecasts for China, and Wednesday�s data could bring about even more downgrades. That�s not good news for Chinese stocks, which are already under pressure from the government�s ever-intensifying crackdown on the country�s fastest-growing industries. Just look at the popular index made up of the biggest 300 Chinese stocks: it�s down by 7% so far this year, even as US and European stock markets flirt with all-time highs.

Zooming out: Watch your emissions.
China might be slowing down, but manufacturing activity in the eurozone is booming at near-record rates. Trouble is, the region�s factories are some of the biggest emitters of carbon dioxide, alongside fossil fuel power plants and the transport industry. The European Union is trying to do something about that, with a �cap and trade� system in place to limit emissions in polluting industries. But companies can still exceed their cap by buying �allowances� from the EU�s carbon market, and boy have they been doing that: the price of carbon allowances hit a record high this week.