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Chinese business activity expands in July as manufacturing sector stabilizes

Chinese business activity continued to grow marginally in July, with the manufacturing sector stabilizing and the services sector expanding modestly, according to data from Caixin and IHS Markit.

The Caixin China Composite Output Index rose to 50.9 in July from 50.6 in the previous month. Services business activity growth eased slightly, with the associated index falling to a five-month low of 51.6 from 52.0, while manufacturing activity broadly stabilized following a contraction in June.

On a composite level, new orders grew at a faster rate in July, with new work from abroad increasing for the second time in three months. Employment remained subdued during the month, with the manufacturing sector reporting the highest decline in staffing levels since February.

Business confidence picked up, with strong optimism seen in the manufacturing sector and services companies remaining upbeat. "It remains to be seen if the economic recovery can continue amid trade fictions with the U.S. and rigid regulations on the financial sector and debt levels," said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group.

"The recovery in July suggests that China's economic slowdown is under control," he added.