China's manufacturing activity shrank again in October but the rate of decline in the world's second-largest economy improved, an independent survey showed on Monday.

The sector is key to the health of the economy, a major driver of global expansion, and has been showing shrinkage for the last eight months.

Chinese growth is slowing and media group Caixin said domestic demand continued to fall, although new export business improved.

Its Purchasing Managers' Index (PMI), which tracks activity in factories and workshops, came in at 48.3 last month, it said in a joint statement with financial information provider Markit, which compiled the survey.

The index is closely watched by investors as a barometer of the country's economic health.

It remained below the breakeven point of 50 but marked the smallest contraction since June, said the statement.
It also beat the median estimate of 47.6 in a poll of economists by Bloomberg News.

"The slight upswing shows the manufacturing industry's overall weakening has slowed down, indicating that previous stimulating measures have begun to take effect," He Fan, an economist at Caixin Insight Group, said in the statement.

China's economy expanded 6.9 percent in the July-September period, the slowest pace since the aftermath of the global financial crisis in 2009, official data showed.

Many analysts believe the actual increase was even lower, due to factors such as the weak PMI readings.

The government has taken a series of measures to stimulate growth. On October 23 it cut interest rates by 0.25 percent -- the sixth reduction in a year -- and abolished the official cap on interest rates for savers, a liberalising move.

But government intervention intended to halt a stock market rout this summer has increased doubts over policymakers' competence in managing a transition to a more market-based economy.

The Caixin survey showed domestic demand remained subdued, leading total new business to fall.

Input costs and selling prices both continued dropping as international commodity prices declined, highlighting deflationary pressures, it added.

The Chinese government's own PMI reading for October stood at 49.8, unchanged from the previous month, the National Bureau of Statistics said on Sunday.