China's manufacturing contracted for the third consecutive month in July, even though the Purchasing Managers Index advanced 0.3 points to 49.7, according to data released Wednesday by the National Bureau of Statistics.

The figure, in line with analysts' expectations, shows a slight recovery thanks to production which, however, has not been enough to stop the slowdown.

In this index, a figure above 50 indicates expansion, while anything below it reflects contraction.

In both May and June, the PMI stood at 49.4 points, returning to a decline in activity after two months of apparent recovery.

Small and medium-sized enterprises took the brunt of the contraction, registering 48.7 and 48.2 points, respectively.

Meanwhile, the indicator for large companies soared 0.8 percentage points from June and managed expansion in registering 50.7 points.

Production is what has kept the manufacturing sector from slumping further. The sub-index for production stood at 52.1 points in July, an increase of 0.8 from the previous month.

However, following the trend in recent months, the sub-index for new orders — which includes both domestic and foreign demand — remained in the contraction zone (49.8).

NBS statistician Zhao Qinghe said it is a good time for the tobacco, paper, medicine, electrical machinery, computer communication and electronics industries.

On the other hand, things were not very encouraging for textiles, metal products or general equipment.

On the whole, the expert welcomed the PMI increase and attributed it to fiscal policies implemented in recent months, focusing mainly on a reduction of taxes and duties.

This, in his opinion, has further reduced the fiscal burden on companies and played an important role in stabilizing confidence in the industry.

Non-manufacturing businesses remained for another month in the expansion zone at 53.7 points, although the figure is 0.5 lower than in June.

This decrease is due to the 0.5 point drop in the services sector, which represents more than half of the country's GDP and stood at 52.9 points.

Zhao attributed this to a slowdown in construction activity due to seasonal factors such as extreme heat and heavy rainfall.