CHINESE business sentiment dropped for the second consecutive month in July to the lowest level since October due to the recent liquidity squeeze, a private report showed today.

The monthly MNI China Business Indicator declined to 53.4 in July from 54.9 in June, Market News International, a unit of Deutsche Boerse Group, said in a report.

"Overall business conditions weakened further in July, potentially hit by the spike in short-term interest rates which began in June," said Philip Uglow, chief economist at MNI.

"One key positive to take from the data, though, was a fourth consecutive rise in new orders, only seen once before in the series' six-year history," he added.

According to the report, firms' ability to obtain credit worsened to the lowest since October 2011, while the interest rates they faced rose to a one-year high.

The results were drawn after surveying 200 companies listed in the Shanghai and Shenzhen stock exchanges.