Further signs of slowing in the world's second-biggest economy sent shudders through global markets Tuesday, adding to the worldwide sense of crisis over China's financial management.

The Chinese government's Purchasing Managers' Index (PMI), which measures activity in the country's vast manufacturing sector, fell to 49.7 in August, representing a contraction in factory activity.

It was the lowest level for the key indicator in three years, and could represent deeper deterioration: Analysts say official figures in China frequently underplay the severity of the situation.

The data, which come after global markets have been rocked by increasing fears over the health of the Chinese economy, highlight the task Beijing faces as it battles to keep a lid on a growing sense of crisis.

They also cast further doubt on the ability of the communist leadership to manage China's adjustment from the high-growth, investment-led model of the last three decades, towards a more sustainable approach.

The numbers delivered a fresh punch to global markets after reeling for a week on worries over the Chinese economy.

Tokyo tumbled 3.84 percent, London's FTSE 100 index plunged 3.03 percent, the CAC 40 in Paris dropped 2.40 percent and Frankfurt's DAX 30 fell 2.38 percent.

On Wall Street, key indices registered similar losses, with the S&P 500 off 2.33 percent in midday trade.

China's economy has been steadily slowing since the double-digit expansions of years past, the last of which came in 2010.

It grew 7.4 percent in 2014, its weakest since 1990, but has slowed further this year, to 7.0 percent for each of the first two quarters.

- Blue skies but grey outlook -

The Chinese economy -- which accounts for one dollar in every eight of global GDP -- has been a lone bright spot since a global slowdown began in 2008.

Its strength has largely been fuelled by massive state spending and huge monetary stimulus, but analysts agree it needs to switch more towards consumer spending.

Investors worry that a failure to manage that re-tooling properly could provide a nasty bump for the Chinese economy -- and much of the rest of the world.

But recent months have offered little comfort.

China's central bank last week cut its benchmark interest rates for the fifth time since November and also further reduced the amount of cash banks must keep on hand.

Since peaking on June 12, Shanghai stocks have plunged nearly 40 percent, prompting broad government interventions to try to shore up domestic exchanges.

In the latest move, Beijing late Monday urged listed companies to merge and restructure, pay cash dividends, and buy back their own shares -- which should see prices rise -- in an effort to encourage investors to hold stock for the long term.

The central People's Bank of China has pumped 290 billion yuan ($45.5 billion) into the money market over the past two days, according to a statement, to shore up confidence.

The statistics bureau said separately on Tuesday that efforts to control pollution in Beijing, Tianjin and neighbouring Hebei province had weighed on factory activity.

That has been particularly marked over recent weeks around Beijing, where authorities have ordered heavy-polluting plants to shutter in a bid to help clear the air in the Chinese capital ahead of a military parade on Thursday.

Julian Evans-Pritchard, China economist at Capital Economics, noted that similar dips were recorded ahead of other important events in the Chinese capital, such as the 2008 Olympics, when "efforts were made to ensure blue skies".

But as disruption from the pollution measures fades and credit growth and fiscal spending pick up "a sustained rebound in economic activity over the coming quarters seems likely", he wrote.

In one positive sign however, a private survey released Tuesday showed signs of life in China's long-suffering property market, an important sector for the economy.

New house prices recorded their first year-on-year rise in 11 months in August, the China Index Academy said, as government monetary easing policies boosted demand.

However, ANZ economists Liu Li-Gang and Louis Lam said in a research note that despite the central bank's monetary easing actions more stimulus measures were needed, calling for "proactive fiscal policy" and "more financial liberalisation".

China new home prices in first annual rise for 11 months: survey
Beijing (AFP) Sept 1, 2015 - New house prices in China rose in August from a year ago for the first time in 11 months, a survey showed Tuesday, as government monetary easing policies boosted demand.

The average cost of a new home in the country's 100 major cities rose 0.15 percent year-on-year to 10,787 yuan ($1,692) per square metre last month, snapping 10 straight months of decline, the China Index Academy (CIA) said in a report.

On a month-on-month basis, new home prices increased 0.95 percent, accelerating from a rise of 0.54 percent in July and the fourth consecutive month of rising prices, according to CIA.

Prices fell for eight months in a row to December last year.

"The property market continued to recover on the back of a series of policy loosenings this year," CIA said in the statement.

The central People's Bank of China (PBoC) has cut benchmark interest rates five times since November, the latest last week, in a bid to shore up the world's number two economy, which is suffering a slowdown in growth.

It also announced it would reduce the amount of money banks are required to keep in reserves -- the fourth such move this year -- in a bid to encourage lending.

"The 'double cuts' will further stimulate consumers' buying impetus," CIA said.

"With active coordination by local governments and accelerated new project launches by property developers, we expect both the supply and demand sides of the real estate market to continue to heat up from next month until the end of the year," it said.

But it added that property firms still had substantial inventories to clear in some cities.

"Home prices will continue to be stable," it said.

The government on Tuesday also lowered minimum downpayment levels on some second home purchases to 20 percent, after reducing the requirement nationwide in March.

The March move rolled back a four-year-old policy implemented to rein in soaring prices that were making homes too expensive for many buyers and raising worries over social unrest.

In many cities, minimum downpayment levels for second homes used to be as high as 70 percent.

But continued weakening in growth in the world's second-largest economy has prompted the government to switch tack to support the property sector, a key driver of expansion.

Land sales to developers are also a major source of revenue for cash-strapped local governments.

China's economy expanded 7.4 percent last year, the slowest pace since 1990, and weakened further to 7.0 percent in each of the first two quarters this year.

The average price in China's top 10 cities was 19,962 yuan per square metre last month, up 3.83 percent from a year earlier -- picking up from a 1.30-percent rise in July.