1st Ld-Writethru: China stocks extend losses on weak economic data

Chinese shares slumped for a second day on Tuesday on weak economic data, suggesting the world's second-largest economy faces mounting downward pressure.

The benchmark Shanghai Composite Index dipped 1.23 percent to end at 3,166.62 points, and the Shenzhen Component Index lost 3.67 percent to close at 10,162.52 points.

The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, fell 5.38 percent to close at 1,889.49 points.

All key indices declined more than 3 percent in early trading, before losses narrowed in the afternoon session. More than 2,000 shares across the two bourses sank.

Stocks in the textile machinery, automobile manufacturing and the steel industry lost most.

Turnover of the two bourses stood at 725.6 billion yuan (113.3 billion U.S. dollars), retreating from Monday's 796.5 billion yuan.

China's manufacturing purchasing managers' index (PMI) came in at 49.7 in August, down from 50 for July and the lowest since August 2012, according to official data released on Tuesday morning.

Meanwhile, a survey released by Caixin Insight Group on Tuesday showed that Chinese manufacturing activity in August suffered the quickest deterioration in operating conditions in six years.

Global markets did not fare much better. Tokyo stocks plummeted on Tuesday as the 225-issue Nikkei Stock Average ended down 724.79 points, or 3.84 percent, from Monday at 18,165.69.

The Dow Jones industrial average lost 0.69 percent to end at 16,528.03 points and the S&P 500 fell 0.84 percent to 1,972.18. The Nasdaq Composite dropped 1.07 percent to 4,776.51.

Facing lingering downward risks, authorities have ramped up efforts to prop up the economy and promote the steady and healthy development of the capital market.

On Monday evening, the central government issued a notice encouraging mergers, cash bonuses and share repurchases by listed companies to expedite reform of state-owned enterprises and stabilize the stock market.

China's banking and housing regulators slashed down payment requirements on Monday evening for second home purchase using provident funds to 20 percent from 30 percent, as long as the buyers have paid off their mortgages on the first home.

These stimulus policies aim to promote structural reforms and stabilize the economy rather than merely bailing out the stock market and propping up the indices, said Guan Qingyou, deputy head of Minsheng Securities.

As macroeconomic fine-tuning continues, structural reforms should be sped up to release the full potential of growth, he urged. Endi