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The purchasing managers’ index (PMI) for the sector fell to 50.1 per cent in June from 50.8 per cent in May, according to data issued by the China Federation of Logistics and Purchasing (CFLP) on Monday.
An index reading greater than 50 indicates expansion, while a reading below 50 indicates contraction.
China’s PMI stayed above 50 per cent for the ninth consecutive month in June.
“Major PMI compounds all declined in June, indicating downward pressure on the economy”, said Zhang Liqun, an analyst with the Development Research Centre of the State Council.
But Zhang also added that economic growth is still in the process of stabilising.
In June, the sub-index for production moved down from 53.3 per cent in May to reach 52.0 per cent, according to a joint statement from the National Bureau of Statistics and CFLP.
Meanwhile, British bank HSBC also released its final PMI reading for the manufacturing sector, dropping from 49.2 in May to 48.2 per cent in June – a nine-month low.
HSBC’s PMI data, which focuses more on small and medium-sized manufacturers, showed that the sector’s production shrank for the first time in eight months.
Qu Hongbin, chief economist at HSBC China, said China’s manufacturing activity was weighed down by declining orders and climbing inventories.
HSBC cut its forecast for China’s GDP growth this year to 7.4 per cent in mid-June, down from its previous forecast of 8.2 per cent.
Recent tight liquidity in China’s interbank market has also added to concerns regarding China’s growth momentum.