Consumption and private investment are still regaining their footing while the property sector remains contractionary, the ADB said, maintaining its GDP growth forecast for China at 4.5 percent in 2024.

They also urged more policy support to cope with weakening external demand and potential risks, as global economic recovery remains sluggish, major developed economies are adopting contractionary policies, and various factors increase market instability and uncertainty.

Indeed, with a discouraging external environment — the global purchasing managers index continues to decline, the trade order index is still in contractionary territory, the currency index continues a downtrend and global investment is declining — it is natural to think in a pessimistic way about the nation's foreign trade, not to mention that some of the leading trade parameters, such as the export delivery index, new orders index and container index, are all telling a similar story.

Lu Ting, chief China economist at Nomura, said that his team expected manufacturing PMI to remain in contractionary territory in July, due to ongoing property woes and external challenges, while the nonmanufacturing PMI could weaken further on fading post-COVID pent-up demand for in-person services.

As the committee has required, relevant authorities will likely actively introduce market-friendly policies and simultaneously prudently introduce policies with a contractionary effect.

It will also actively roll out more policies conducive to stabilizing growth, the MIIT said in a statement released after a meeting, urging caution when introducing contractionary policies to ensure the industrial economy operates within a reasonable range.

Related authorities should "actively roll out policies conducive to the market and remain cautious when introducing any measures that have contractionary effects," said a statement released after a meeting of the State Council's financial stability and development committee on Wednesday.

The meeting stressed that relevant authorities should earnestly shoulder their responsibilities, actively introduce market-friendly policies and prudently introduce policies with a contractionary effect.

He said the government needs to be prudent in mapping out policies with contractionary effects, and more efforts should be made to expand domestic demand, strengthen industrial and supply chains and guard against and defuse major risks.

(Policymakers) need to be prudent in mapping out policies with contractionary effects," Wang added.

Han urged governments to actively introduce policies that are conducive to economic stability, and remain cautious toward policies that have a contractionary effect.

China, he said, should evaluate the likely impact of fiscal and monetary policies on economic development in advance and be prudent on mapping out policies with contractionary effects.

"The fiscal policy, which has been significantly contractionary this year, should temporarily shift to a neutral stance and focus on strengthening social protections and promoting green investment over traditional infrastructure spending," the IMF said.

The subindex of new orders dropped into contractionary territory for the first time in 18 months and came in at 49.6, versus 50.9 in July.

"The Chinese government will carry out reforms promoting economic growth and will be cautious in rolling out policies that have a contractionary effect," he said.

All sides should actively introduce policies that can help stabilize the economy and be cautious in rolling out measures that could have a contractionary effect, Han said.

Fiscal policy will turn to being moderately contractionary, compared with 2020.