CHINA'S manufacturing activity weakened in June, the latest evidence of uncertainties in the world's second-largest economy.

The official Purchasing Managers' Index, a comprehensive gauge of operating conditions in state-owned industrial companies, retreated to 50.1 last month, the China Federation of Logistics and Purchasing said yesterday. The pace, the slowest in four months, slipped from May's 50.8 and April's 50.6.

A reading above 50 means expansion, and June was the ninth consecutive month the index had been above this level.

Zhang Liqun, an economist at the State Council's Development Research Center, said the slowdown in manufacturing indicated downward risks for China's economy.

"Almost all major component indexes fell in June, indicating pressure for China's future economic growth," Zhang said. "The headline index has just barely managed to stay above the demarcation line of expansion and contraction."

The component indexes showed that new orders dropped 1.4 points from a month earlier to 50.4, production decreased 1.3 points to 52, and employment lost 0.1 points to 48.7.

Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd, said the official PMI figures suggest China's recovery remains fragile.

China's gross domestic product expanded 7.7 percent in the first three months, slowing from 7.9 percent in 2012's final quarter and falling short of expectations of a mild economic recovery.

In May, the International Monetary Fund lowered its projection of China's economic growth this year from 8 percent to 7.75 percent.

There have been calls for restrictive policies to be lifted, especially in recent months as inflation eased.

Meanwhile, the HSBC Purchasing Managers' Index, which gauges conditions for private and export-oriented manufacturers, posted 48.2 in June, a nine-month low which was down from 49.2 in May.

Qu Hongbin, chief economist for China at HSBC, said falling orders and rising inventories, which signaled deterioration of business conditions, hurt Chinese manufacturers in June.

"The recent cash crunch in the interbank market is likely to slow expansion of off-balance-sheet lending, further exacerbating funding conditions for smaller enterprises," Qu said.

But China appears to be refraining from using stimulus measures and the ongoing slowdown is likely to continue in the coming months, Qu said.

Zhu Haibin, J.P. Morgan's China chief economist, said the biggest challenge that China's economy was facing remained the weakness in its manufacturing sector.

"This is related to the overcapacity in a number of key industries like steel, cement and machinery, and the declining rate of return on investment," Zhu said. He maintained a forecast of China's full-year growth at 7.6 percent.