China's manufacturing sector reported a slight contraction last month. Torrential rains and floods affected economic activity across a major part of the country in July, and as a result, the manufacturing sector saw a slight drop.

For July, China's manufacturing purchasing manager's index (PMI), released by China's National Bureau of Statistics (NBS), came in at 49.9, which is only marginally lower compared to 50.0 measured in June, according to Xinhua. It is, however, the lowest level recorded since February.

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The manufacturing activity and transportation were disrupted because of floods across large parts of China, Zhao Qinghe, a statistician at NBS, said that the slight drop in the manufacturing sector was also due to weak market demand and weak investment sentiment in the private sector.

On the other hand, China's high-tech manufacturing sector remained unaffected due to floods and weak investment sentiment and reported high activity level. This sector measured the highest sub-index reading for this year in July -- 53.2, according to Zhao.  

Also, China's economy, the world's second-largest economy, has started showing signs of stabilizing and growth. Caixin's sub-indexes observed growth in output, new orders, and inventory. They "surged past the neutral 50-point level that separates growth from decline," according to Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, was quoted as saying by CNBC.

Zhong believes that the surge in production, new orders, and inventory underlines that the gradual implementation of proactive fiscal policy is working.   

He, however, warned that "downward pressure still remains" and there is still need for supportive fiscal and monetary policy measures. 

Tagschina's economy, China's manufacturing sector