Chinese manufacturing growth continues to slow

Growth in China's manufacturing activity slowed for the fourth straight month in July.

Inflationary pressures have also eased, data showed yesterday, as Beijing's efforts to slow the economy take effect.

The official purchasing managers' index fell to 50.7 last month from 50.9 in June, the lowest level in more than two years, the China Federation of Logistics and Purchasing said.

A reading above 50 indicates the sector is expanding while a reading below 50 indicates contraction.

An index measuring the cost of raw materials used to make products also fell slightly to 56.3 in July from 56.7 in the previous month, indicating that inflation - a major bugbear for Beijing - was easing.

HSBC is due to publish its purchasing managers' index today.

Preliminary figures released by the British banking giant last month showed that manufacturing activity contracted for the first time in a year in July to hit a 28-month low of 48.9 from a final reading of 50.1 in June.

However, the figures also indicated that despite several interest rate hikes aimed at tempering stubbornly high inflation, the cost of raw materials continued to rise.

Chinese officials have been pulling on a variety of levers to prevent the economy from overheating and rein in inflation - which hit a three-year high of 6.4 per cent in June - amid fears high prices could trigger social unrest.

In a bid to stop money flooding the system, Beijing has increased the amount banks must hold in reserve several times - which cut lending 10 per cent in the first half of 2011 - while interest rates have risen five times since October.AAP