The July HSBC China Flash PMI (Purchasing Managers' Index) came in at 47.7.
A reading below 50 indicates contraction.
This latest survey missed expectations significantly - markets were expecting a reading of 48.2.
China is slowing fast, it seems. This will affect Australia, and consequently New Zealand.
The New Zealand dollar fell 50 basis points on the news.
Chinese economic data disappointed markets in June and caused many to panic about the economic slowdown as second quarter GDP came in at 7.5%.
Premier Li Keqiang helped calm markets on Monday by saying that 7.5% is the growth floor for 2013.
But this latest news reaffirms fears.
The official PMI is due on August 1 and will be even more closely watched. For June, it slipped to 50.1 and has been declining since March. Observers are now expecting it to fall below 50 indicating contraction.
The HSBC Markit PMI which was released today focuses on medium sized firms. The official PMI has larger businesses in its 3,000 firm survey.
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