(Yicai Global) June 30 -- Activity in China’s manufacturing sector remained in contraction territory for the third month in a row in June, though the official yardstick improved a little.

The manufacturing purchasing managers’ index was 49 this month, up from 48.8 in May, indicating that the economy is stabilizing, data released by the National Bureau of Statistics showed today. The figure was 49.2 in April and 51.9 in March. Fifty is the dividing line between contraction and expansion.

The forces driving China’s overall economic recovery are strengthening, its foundation is solidifying, and manufacturing activities are rebounding, said Zhang Liqun, an analyst at the China Federation of Logistics and Purchasing.

The supplier delivery times and the production indexes stood above 50. The first came in at 50.4, down 0.1 point from May, while the other rose 0.7 point to 50.3.

The raw material inventory and employment indexes both dropped 0.2 point to 47.4 and 48.2, respectively. The new order index rose 0.3 point to 48.6 percent, ending a three-month decline but remaining in negative territory, showing that demand is still not enough but is stabilizing.

Market demand is insufficient, and overseas demand is shrinking, said Wen Tao, an analyst at the China Logistics Information Center. The number of surveyed companies saying demand is insufficient rose 2.3 points to a record high 61.1 percent.

The new export orders index fell 0.8 point to 46.4 from May, declining for the fourth straight month and a main reason for inadequate demand.

The manufacturing PMI for large companies rose 0.3 point to 50.3 and that for mid-sized firms gained 1.3 point to 48.9. Meanwhile, the figure for small enterprises fell 1.5 point to 46.4, down for the fourth consecutive month.

Most small companies are private, so the drop in their manufacturing PMI means that pressure is mounting on the private economy, Wen noted.

Now is the key moment to reverse the contraction in demand, Zhang said. China should put more effort into expanding domestic demand and improving the policy effects, and government investment should play a stronger role in boosting social investment, boosting corporate confidence to produce and invest, and improving the jobs situation, he added.

Editors: Tang Shihua, Futura Costaglione