The Caixin General China Manufacturing Purchasing Managers' Index (PMI), an indicator of factory activity based on a private survey, dropped to 48.6 in June from 49.2 in May.
The reading, released on Friday after research by financial information service provider Markit sponsored by Caixin Media, is below the neutral 50-point level, signalling a marginal deterioration in the manufacturing sector.
A reading above 50 indicates expansion, while a reading below 50 represents contraction.
The June figure was the lowest since January, when the PMI dipped to 48.4, and marked the 16th consecutive month of contraction, according to the Caixin report.
Caixin attributed the decline to sluggish demand at home and abroad.Total new orders decreased in June for the second month in a row for manufacturers, driven by the seventh straight monthly decline in new export sales.
"Against the backdrop of a turbulent external environment, and in order to avert a sharp economic decline, the government must strengthen its proactive fiscal policy while continuing to follow prudent monetary policy," said Zhong Zhengsheng, director of Macroeconomic Analysis at CEBM Group, a subsidiary of Caixin Insight Group.
The data came on the heels of the official PMI that showed manufacturing activity dropped slightly in June.
The official PMI came in at 50 in June, slightly lower than May's 50.1. It was the lowest reading since March's 50.2, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
The official PMI samples 3,000 relatively large enterprises in China. The Caixin PMI samples 420 small and medium-sized manufacturing enterprises and is relatively volatile due to its small sample size and the dominance of small enterprises.
