China stocks continued to head south on Friday following the release of weak economic data.
The benchmark Shanghai Composite Index slumped 4.27 percent to close at 3507.74 points, down more than 11 percent from a week before.
The Shenzhen Component Index dived 5.42 percent to close at 11,902.05. The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, slumped 6.65 percent to end at 2,341.95.
More than 300 companies fell by the daily limit of 10 percent. Shares in public transportation, communication, and highways were among the biggest losers.
The shares opened slightly lower in the morning and then plunged after the release of Caixin flash China general manufacturing PMI, which retreated to 47.1 in August from 47.8 in July, the lowest point since March 2009.
The flash index is the earliest available indicator of manufacturing sector operating conditions in China. A reading above 50 indicates expansion, while a reading below that represents contraction.
Despite the central bank's continuous injection of funds this week, the stock market has fluctuated dramatically. The major Shanghai Composite Index dived 6.15 percent on Tuesday, followed by a slight recovery on Wednesday and another slump of 3.42 percent on Thursday.
The People's Bank of China pumped 240 billion yuan (37.55 billion U.S. dollars) into the money market via reverse repurchase agreement (repo) and injected another 110 billion yuan through medium-term lending facility (MLF) this week.
The market still speculates that the central bank would lower the reserve requirement ratio (RRR) to provide more liquidity.
Xu Hanfei, an analyst with Guotai Junan Securities, said open market operations and overall monetary easing is not interchangeable.
"On one hand, the central bank has to hedge against capital outflow to maintain liquidity," Xu told Shanghai Securities News. "On the other hand, it also has to lower financing costs in the short-to-medium term in order to stimulate investment."
Xu predicted the central bank will cut the RRR by 50 to 100 basis points in the third quarter of 2015.
