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China's official purchasing managers' index (PMI) fell to 50.4 in May, the weakest reading this year and down from April's 13-month high in the latest sign that output in the world's second biggest economy is cooling.
The news sent Australian stocks and the Aussie dollar lower, as the commodity-rich country counts China as its biggest trading partner.
Economists polled by Reuters this week had expected the official PMI to retreat to 52.2 for May, from 53.3 in April.
"This data shows the speed of growth has shown some moderation, but the index has been above 50 for six months which means the growth momentum hasn't changed," the National Bureau of Statistics said in a statement accompanying the index.
"The present short term moderation in growth does not mean the Chinese economy is entering a new recession," it added.
The HSBC China Flash PMI, which gave an earlier glimpse of activity in China's vast factory sector, also retreated in May, reflecting a seventh straight month of contraction. HSBC's final May reading will be released later on Friday.
Unexpectedly weak data for April, including a 9.3 percent annual rise in factory output, the weakest pace in nearly three years, galvanized central planners into releasing a number of pro-growth measures, including accelerating project approvals and permitting private capital into sectors previously reserved to the state.
Analysts now expect China's economy will only regain momentum in the second half of this year.
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