China manufacturing drops to nine-month low in June

Manufacturing in China contracted this month on weakening demand. This has increased concerns about the strength of the recovery in the world's second-largest economy.

AFP reports that HSBC's monthly Purchasing Managers Index (PMI) for manufacturing fell from 49.2 in May to 48.3 in June. This figure represents a nine-month low.

In addition, output dropped from 50.7 to 48.8 last month, which is an eight-month low. All results below 50 represent a contraction, while figures over 50 correspond to expansions.

According to HSBC, the Chinese manufacturing sector is being affected by weak external demand from the struggling US and European economies, as well as moderating domestic demand.

"Manufacturing sectors are weighed down by deteriorating external demand, moderating domestic demand and rising destocking pressures," Qu Hongbin, HSBC's chief economist for China, said in a release.

In the first three months of this year, the Chinese economy grew by only 7.7 percent. Analysts had hoped for a stronger result this year, following a good performance at the end of last year.

The target set by the government for 2103 is 7.5 per cent and the government is aiming to move from exports to increased domestic consumption.

"Beijing prefers to use reforms rather than stimulus to sustain growth," Qu said.

"While reforms can boost long-term growth prospects, they will have a limited impact in the short term."

As the ABC reports, the PMI result in China has resulted in a drop in the Australian share market and local currency, as concerns that our exports will be affected increase.