China Manufacturing activity down to two year low

A new survey revealed that manufacturing activity in China contracted the most in two years, adding to investors' worries about the world's second largest economy.

The final July reading for Caixin China purchasing managers' index (PMI), a manufacturing index based on a survey of factory purchasing managers, came in at 47.8, lower than the preliminary reading of 48.2. The reading was the lowest since July 2013, when it fell to 47.7. The results come after the release over the week-end of the official PMI, which focuses on larger companies. It fell to 50 in July from 50.2 in June.

Market strategist at trading firm IG Bernard Aw said in a comment the data was not surprising and reinforced the view that there will be further weakness in China's economy.

"I feel that the macro outlook of China – which is probably slowing further – has already been considered by the market."

£1.5 trillion wiped out from the market

The disappointing results are the latest in a string of weak economic data highlighting the country’s struggling stocks, sluggish property market and weak demand at home and abroad.

Chinese stock markets suffered three weeks of continued losses in June that wiped out £1.5 trillion. Drastic government measures were introduced to stop the slide, with the China Securities Regulatory Commission banning investors holding more than five per cent of a company's shares from selling any of their holdings for the next six months.

Other measures introduced earlier include a ban on short-selling, a suspension of initial public offerings and the injection by 21 brokerages of 128 billion yuan (£13 billion) into a stabilisation fund to support the market. 

Chinese authorities also cut interest rates for the fourth time since November and relaxed margin lending rules. 

The latest measures by Chinese regulators also include an investigation into suspicious activity of trading on the mainland. China’s securities regulator said on Friday (July 31st) that it has launched a probe into automated trading and has restricted 34 stock accounts suspected of influencing stock prices as of Monday.