SHANGHAI stocks declined this morning, led by distilleries, even though statistics indicated that China's manufacturing sector expanded at the fastest pace in 11 months.

The benchmark Shanghai Composite Index shed 0.16 percent to 2,233.13 points. Turnover was 40.2 billion yuan (US$6.5 billion) by the noon break.

China's official Purchasing Managers' Index, a gauge of manufacturing activity slanted more towards state-owned firms, rose to 50.9 last month from 50.1 in February, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

The reading was the highest since May 2012 and has stayed above 50 for six months in a row. A reading of 50 or higher indicates the activity is expanding.

A separate PMI released by HSBC Holdings PLC also showed the index climbed to 51.6 in March, up from 50.4 in February. The HSBC PMI is slanted more towards private and export-oriented firms.

Distilleries led the market down amid concerns that demand for liquors will diminish as the government cuts spending on banquets.

Kweichow Moutai Co, a leading producer of high-end liquor in China, dropped 1.8 percent to 165.83 yuan. Shanxi Xinghuacun Fen Wine Factory Co slumped 5.4 percent to 28.38 yuan. Sichuan Tuopai Shede Wine Co sank 3.8 percent to 19.35 yuan.

Non-ferrous metals produces also declined. Inner Mongolia Baotou Steel Rare-earth Hi-tech Co, China's biggest producer of rare earth materials, fell 2 percent to 29.21 yuan. Shandong Gold Mining Co decreased 2.3 percent to 32.13 yuan. Zhongjin Gold Corp dropped 3.1 percent to 13.78 yuan.