Xinhua quoted the China Federation of Logistics and Purchasing said the Purchasing Managers' Index for China manufacturing sector stood at 51.2% in July down by 0.9 percentage points from the previous month.

The PMI includes a package of indices to measure manufacturing sector performance. A reading above 50% indicates economic expansion, while that below 50 percent indicates contraction.

The index is down for the third consecutive month, but it was the 17th straight month that it stayed above 50%. The index hit a record low of 38.8% in November 2008 when the global financial crisis started to weigh on China economy. The last time the index fell below 50 was February last year.

Mr Zhang Liqun a researcher with the State Council Development Research Center said "The slowed manufacturing sector growth indicated a further slowdown in the country economic growth."

China gross domestic product grew 10.3% between April and June, retreating from the 11.9% growth in the first three months, as the effects of the CNY 4 trillion stimulus packages weaned off which eased fixed asset investment expansion.

However, Mr Zhang believed that as both domestic and global market improved, there is much room for the government to fine tune its macro policies. Therefore, a significant drop in investment growth and a decline in export are not likely to happen.

He said that "The economic growth for the whole year is expected to stay around 9.5%."

(Sourced from Xinhua)