Chinese manufacturing slows in July

As the second-largest economy in the world, what happens in China can send ripples throughout the international markets - which is why a new Purchasing Managers' Index (PMI) survey indicating factory output has slowed will have a large bearing on investor confidence.

According to the latest PMI from the Federation of Logistics and Purchasing, manufacturing production slowed from 50.2 in June to 50.1 last month.

This is far lower than the 50.5 mean prediction from analysts for July and is the latest indication that China's years of exponential growth are over.

Where PMI readings are lower than 50, it is indicative of contraction, therefore the Chinese manufacturing sector is edging closer to negative territory.

A separate PMI report from HSBC revealed factory output was 49.3 in July and just 48.2 in June - which paints a gloomy picture of the Asian superpower's industrial outlook.

The Federation's report stated: "The index dropped with off-season declines in production and construction, allowing little evidence the economy is bottoming out.

"Current demand is weak and downward pressure has yet to eliminate oversupply."

One of the reasons why manufacturing output is not prospering at present is due to economic issues overseas, such as the eurozone debt crisis and financial situation in the US - both of which are major export markets for China.

In a bid to regain lost ground due to waning foreign demand, decision-makers in Beijing have slashed interest rates and fuel costs.

But events overseas have been dragging the Asian nation down for some time, with its economic growth falling to a three-year low of 7.6 per cent in the second quarter, fuelling concerns the country's period of double-digit growth has come to an end.

At close this morning (August 31st), the Shanghai SSE Composite Index rose 19.7 points to an index value of 2123.3 points, while the Hang Seng in Hong Kong was stable at 19800 points.