China manufacturing drops to slowest pace in eight months

Manufacturing activity in China fell in July to its slowest pace in eight months, renewing fears of a slowdown in the economy. The Purchasing Managers Index (PMI) dropped to 50.1 from 50.2 in June, official data showed.

A reading above 50 indicates an expansion in activity, while below 50 means a contraction. Economists had expected the Chinese economy to pick up in the second half of this year.

Factory output was still expanding, but new orders, including export orders, had contracted in July more than in June, according to data from the state-affiliated China Federation of Logistics and Purchasing.

The official PMI was the lowest reading since November and is the latest sign that the growth of the Chinese economy is slowing. A decline in new orders at China's factories confirms exports being hit by slowdown in Europe and the US Gross domestic product fell to a three-year low of 7.6 percent in the three months ending June 30.

Chinese leaders have said the risks to the economy are great, citing slow demand from Europe as one of the main factors. "Economic downward pressure is still relatively large," said Premier Wen Jiabao on Tuesday, according to the official Xinhua News Agency.