(Yicai) Jan. 3 -- Activity in China's manufacturing sector expanded for a third straight month in December while slowing, as production and new orders fell to the lowest in three months.

The Caixin manufacturing purchasing managers' index came in at 50.5 last month, down from a five-month high of 51.5 in November, according to data released yesterday by financial media group Caixin. A reading above 50 indicates expansion.

The widely watched private gauge matched the official manufacturing PMI published by the National Bureau of Statistics, which also expanded for the third consecutive month while dipping 0.2 point to 50.1. 

The effects of the economic stimulus package have continued to unfold since late September, leading to more positive changes and a stable economy overall, said Wang Zhe, senior economist at Caixin Insight Group. But some sub-indexes showed signs of weakness last month, and the sustainability and effectiveness of earlier policy stimulus requires further monitoring, he added.

The external environment will become even more complex this year, so the policy response should be prepared in advance and adjusted in a timely manner, Wang noted. The policy focus needs to be on increasing household incomes and improving people's livelihoods, especially by lifting the consumption capacity of disadvantaged groups and their willingness to spend, he said.

Supply and demand showed signs of slowing down in December, with production and new orders hitting three-month lows, and external demand stopped growing as new export orders shrank. Employment continued to rise but remained in contraction territory.

Sentiment remained optimistic though less upbeat, with the expansion in business activity dropping to its lowest in three months while staying in expansion territory.

The companies surveyed said that the launch of new products and policy support will drive sales growth over the coming year. But some expressed concerns about the potential impact on production and trade of higher US import tariffs.

Editor: Martin Kadiev