BEIJING: China's manufacturing activity hit a seven-month low in June as shrinking exports and weak domestic demand shook the world's second largest economy, British bank HSBC said Thursday.
HSBC said its closely-watched preliminary purchasing managers index (PMI), which gauges the manufacturing sector, fell to 48.1 in June from 48.4 in May.
The June figure also marked the eighth consecutive month that manufacturing has contracted. A PMI reading above 50 indicates expansion, while a reading below 50 points to contraction.
Analysts said the latest figure suggests China will further move to boost its slowing economy, after cutting interest rates earlier this month and encouraging more government investment.
"China's manufacturing sector continued to slow in June," HSBC's co-head of Asian economic research, Qu Hongbin, said in the statement.
"With external headwinds remaining strong, exports are likely to decelerate in the coming months."
New export orders, a component of PMI, recorded their sharpest decline since March 2009, HSBC said, but did not give a figure. The bank will release the final data for June later.
China's commerce minister said earlier this month that the country faces a "severe" trade situation this year, as weak demand in key exports markets such as the United States and Europe hurt the Asian powerhouse.
In a further worry for the economy, weaker prices and a contraction in new orders suggested domestic demand is also flagging, Qu said.
"We expect more decisive policy stimulus to reverse the growth slowdown," he said.
China on June 8 cut interest rates for the first time in more than three years in a bid to boost the slowing economy.
The nation's economy grew an annual 8.1 percent in the first quarter of 2012 -- its slowest pace in nearly three years.
The government has reduced its economic growth target for this year to just 7.5 percent, down from actual growth of 9.2 percent for all of last year and 10.4 percent in 2010.
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