China manufacturing activity dipped in July

China's manufacturing activity was down slightly in July, suggesting a deterioration in the operating environment at the nation's factories, with tighter monetary conditions hitting the sector further, as per data released today by HSBC.

The monthly purchasing managers index was down to 49.3, the lowest since March 2009, as against 50.1 in June, HSBC said in its monthly statement. The final outcome was higher than the 48.9 recorded in a preliminary reading that HSBC released a few days back.

The data, based on the results of a survey conducted by Markit confirmed a slowing down of the growth momentum in the manufacturing sector ''against the backdrop of sustained tightening and lackluster external demand,'' Hongbin Qu, HSBC's chief economist for China, said in a statement accompanying the data.

''That said, the current level of the PMI is still consistent with a 12 per cent-13 per cent growth rate of industrial production, which leaves room for Beijing to keep tightening policy through [the third quarter] to check inflation,'' Qu said.

The contraction comes in the wake of policy makers in China raising interest rates and the proportion of deposits banks need to keep in reserve, several times over the last few quarters, to control price increases.

The bank's PMI release came following an official PMI gauge published yesterday by the China Federation of Logistics and Purchasing, which also showed a further slowdown in activity at Chinese factories in July.