Mainland manufacturing contracted in August for the first time in nine months, a development that could prompt more policy easing by Beijing's economic planners.
The official purchasing managers' index (PMI) dropped 0.9 points to 49.2 last month, from 50.1 in July, in the face of a drop in new orders, weaker production and job losses and weaker production, the National Bureau of Statistics and the China Federation of Logistics and Purchasing said yesterday.
The index fell below 50 for the first time since December. A reading above 50 indicates expansion, while a reading below 50 suggests contraction.
Analysts said weak external demand continued to drag down the nation's economic growth, while domestic demand had yet pick up.
"It's a bit unexpected," said Lu Ting, China economist at Bank of America-Merrill Lynch. He said the PMI reading was significantly below the market consensus of 50 and his bank's forecast of 49.7.
The sub-index for new orders fell to 48.7 from 49 in July, which signalled weaker domestic demand, according to Lu. The employment sub-index edged down to 49.1 from 49.5 a month ago, signalling the job market is under stress. A decline in the sub-index for raw material inventories to 45.1, from 48.5, implies manufacturers lack confidence and points to further weakness in production.