A closely watched index on China's economic activity hit an eight-month low for July as new export orders fell at the steepest pace in more than two years.

The Caixin/Markit Purchasing Manager's Index came in at 50.8, down from 51.0 in June, the two organizations said in a press release on Wednesday. The manufacturing reading matched expectations of economists polled by Reuters who had expected the index to hit 50.8 for July.

Even though the reading was the lowest in months, it was still above 50, signaling that the sector was in expansion. A reading below 50 signals contraction.

"Data suggested that reduced external demand contributed to the slowdown, as exports fell for the fourth month in a row. Notably, the rate at which new export business declined was the quickest recorded for just over two years amid reports of subdued market conditions," Caixin and Markit said.

In July, manufacturing output and new business were slower from June, they added.

Employment across China's manufacturing sector also continued to slow in July.

The Caixin/Markit manufacturing PMI reading was the second data point this week showing a slowdown in the growth of China's manufacturing activity.

On Tuesday, China released its official PMI, which showed manufacturing activity fell to 51.2 in July from 51.5 in June.

China's official PMI gauge focuses on large companies and state-owned enterprises, while the reading by Caixin and IHS Markit focuses on small and medium-sized enterprises.

Economic data from China is being watched closely amid trade tensions between Beijing and Washington.

U.S. took effect on July 6. with duties of its own on the same value of American goods.

President Donald Trump's administration countered that it is preparing possible tariffs on more in Chinese goods. In July, the president said he was willing to slap tariffs on every Chinese-made product shipped to the U.S.

There are fears that the trade spat between the world's two largest economies could hit markets and even the global economy.