China manufacturing down to six-year low

<p>Manufacturing activity in China shrank at its fastest pace in more than six years.</p>

A survey showing Chinese manufacturing contracted at the fastest pace since the 2009 has renewed fears about a slowdown in China.

The preliminary version of the Caixin purchasing managers' index, a manufacturing index based on a survey of factory purchasing managers, fell to an unexpectedly low 47.1 points from July's 47.8 points.

It was significantly weaker than the median estimate of 48.2 from a poll of economists by Bloomberg News.

The data fuelled worries about the health of the world's second largest economy and led investors to the safety of bonds and gold. The Shanghai Composite Index tumbled 4.2 per cent to 3,509.98 today (August 21th), and down 12 per cent overall this week.

A string of weak data

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.

Recent data also showed the country's exports fell by 8.3 per cent in July, which led the People's Bank of China (PBOC) to devalue the yuan, arguing that the way it sets exchange rates would now become more market-oriented.

China's economy expanded 7.4 per cent last year, its weakest since 1990, and has slowed further this year.

Nicholas Teo, market analyst with CMC markets, told the BBC that China's slumping economy could dash hopes for a global recovery.

"China today is no longer just the 'factory' of the world. It is an important consumer of the world's products and services. Many companies and industries depend on the Chinese consumers who are now 'disadvantaged' in purchasing power. So when it sneezes', many around the globe may just catch a cold," he said.

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