China manufacturing slows in July as exports dip

China's manufacturing slowdown has continued in July as demand for exports weakened.

The purchasing managers index (PMI) fell to 50.7 from 50.9 the previous month, the China Federation of Logistics and Purchasing (CFLP) said.

China has been taking steps to cool its overheating economy and bring down the rate of inflation.

In its report the CFLP said the figures showed that "economic development is trending towards a stabilisation".

PMI, measured on a scale of 100, is designed to give a snapshot of industrial production. A PMI reading of below 50 indicates contracting activity.

'Lacklustre demand'

The government has been trying to rein in rampant inflation which is at three-year highs.

A number of measures have been employed to slow economic activity to more sustainable levels, including raising interest rates and increasing the amount of money banks need to keep in reserve.

At the same time, external demand for Chinese-made goods has waned as European and US economies have come under pressure amid debt crises and continuing domestic economic problems.

According to Qu Hongbin of HSBC the most recent Chinese PMI figures showed "the slowing growth momentum of the manufacturing sector, against the backdrop of sustained tightening and lacklustre external demand".

The slide was underlined by a separate PMI report, published by HSBC. This showed a contraction in the bank's purchasing managers' index, with it falling below 50 to its lowest level in a year.