China's manufacturing activity contracted for the eighth consecutive month in June, British bank HSBC said today.
Analysts said the fall will prompt more government moves to boost the flagging economy.
The bank's purchasing managers' index (PMI) for China, which gauges the manufacturing sector, fell to 48.2 in June from 48.4 in May.
A reading above 50 indicates expansion, while a reading below 50 points to contraction. A preliminary reading for June was 48.1.
The weaker manufacturing came despite an interest rate cut last month.
The Chinese government has been trying to avert a hard landing for the world's number two economy, which has been hit by weakness in key export markets such as the US and Europe. China's economy grew an annual 8.1% in the first quarter of 2012 - its slowest pace in nearly three years.
The government will release the gross domestic product (GDP) figure for the second quarter next week. HSBC forecast GDP growth could slow to 7.8% in the second quarter, before rebounding later this year.
The June 8 rate cut was China's first in more than three years. The People's Bank of China, or central bank, cut the benchmark one-year lending rate by 0.25 percentage points, while the one-year deposit rate fell by the same amount.
Analysts also expect the government to further trim reserve requirements for banks, following three such moves since December last year.
China's official PMI has painted a slightly better picture of the economy. PMI fell to a seven-month low of 50.2 in June, industry group the China Federation of Logistics and Purchasing said Sunday, but manufacturing activity has not contracted since November last year.
Analysts say the divergence in the PMI measures is caused by HSBC giving more weighting to small firms, which have suffered more than state-owned giants in the current economic downturn.
Chinese megacity limits new car sales
China's booming southern city of Guangzhou has imposed a cap on the number of cars allowed to be sold in an effort to curb worsening traffic and pollution, state media said today.
Guangzhou, one of the biggest cities in China with a population of more than 16 million according to the Chinese press, will issue registration plates for only 120,000 small and medium-sized passenger cars for the next 12 months.
The policy is aimed at "ensuring the effective flow of the city's transportation and protecting and improving the air quality," said a city government statement after the weekend announcement.
The number of cars that will be allowed to be sold over the next year is roughly half the total sold in 2011, according to reports in the state media.
Guangzhou had 2.4 million cars by the end of May, more than double the number five years ago, according to a report in the China Business News.
It becomes the third Chinese city, after the capital, Beijing, and Guiyang in the country's southwest, to introduce registration plate limits in an effort to combat the escalating number of cars on China's roads.
