A key preliminary gauge of manufacturing activity in China has hit a 15-month low, with analysts blaming the recent stock market rout and weak export demand.
The flash Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) has fallen to 48.2 this month, compared with a final reading of 49.4 in June.
The data, which draws more heavily on private business than the official PMI, bucked expectations of a mild improvement to 49.7, and is the lowest reading since April last year.
This was also the fifth straight month of the index falling below 50, which indicates contraction.
July is also shaping up as a difficult month for the euro zone economy with the ongoing Greek debt crisis undermining confidence across the region, analysts said.
Concern over China's economic health sent bourses across Asia tumbling yesterday.
Japan fell 0.67 per cent, Hong Kong slipped 1.06 per cent, Shanghai skidded 1.29 per cent, Shenzhen fell 1.27 per cent and South Korea dropped 0.93 per cent. Singapore dipped 0.11 per cent.
South Korea's economy recorded its weakest expansion in six years in the second quarter, while Japan's exports to China were weak, rekindling fears of slowing corporate profits across Asia.
Merrill Lynch (Singapore) Asean economist Chua Hak Bin noted that China's slowdown and weaker growth in neighbouring countries such as Malaysia, Indonesia and Thailand are dampening the outlook for Singapore's growth and "outweighing the lift from an improving American economy".
Dr Chua said he is maintaining Singapore's growth forecast of 2 per cent for this year and 2.2 per cent for 2016.
The latest numbers suggest that the Chinese economy has yet to find its footing despite several interest-rate cuts, infrastructure spending and signs that the property market appears to be on the mend.
Analysts say that the much lower-than-expected PMI reading also casts doubt on the 7 per cent growth the government reported for the second quarter, after indicators from industrial production, retail sales and investment in factories and buildings remain weak.
HSBC economists Qu Hongbin and Julia Wang noted that the low reading reflects a slowdown in domestic and external demand.
"Given the survey-based nature of the PMI, it cannot be ruled out that today's number may have been disproportionately impacted by the weakened sentiment following the equity market correction since June," they said.
"Some aspects of the economy are improving. For example, property sales growth has continued to rebound.
"But these signs of recovery remain tentative, and further policy-easing measures are needed to strengthen the recovery," they said.