What's going on?

Data out this week showed manufacturing activity in China shrank last month.

What does this mean?

China�s reputation as �the world�s factory� is down to the sheer power of its manufacturing industry, which carries so much heft that it typically gives an insight into the economy as a whole. So it�s not promising, then, that a cacophony of issues meant the sector slacked last month.

For one, an extreme heatwave caused historic droughts harsh enough to dry up rivers that feed hydroelectric plants. Even the Yangtze � China�s most important trade waterway � withered to its lowest level on record. Not only has that disrupted shipping routes, but it�s also forced provinces to cut factories� electricity to manage power shortages. And for another, the country�s relentless commitment to its zero-Covid policy�sent demand for products slipping, leaving businesses twiddling their thumbs. That, then, might be why a survey taken by business managers showed manufacturing activity actually shrank in August for�the first time since May.

Why should I care?

Zooming in: Here we go again.
The bad news just keeps coming, with reports on Thursday revealing the city of Chengdu � a tech and carmaking hub � will lock down 21 million residents amid another outbreak, which will only stunt manufacturing more. Then again, there mightn�t be much to miss: an export-oriented survey signaled that foreign demand � a key pillar of support for China�s economy during the pandemic � might be drying up.

The bigger picture: Is this� climate change?
This could all be a blessing in disguise for heatwave-stricken Mother Nature: data out on this week showed China�s carbon emissions fell almost 8% this April through June � the last period of major lockdowns � versus the same time last year, the steepest drop in the past decade. But those slowdowns at hydropower plants might be a sticking point, with some analysts expecting China to plug the gap with carbon-pumping coal � dashing the hopes of another greener season.