CHINA: PMI drop indicates slowdown in manufacturing 

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The leading indicators, the purchasing managers' indexes of manufacturing, showed that China's manufacturing sector -  which is the key pillar to the country's economy - continued to slow down in July, which may force policymakers in Beijing to slant back to stimulus actions.

The manufacturing PMI compiled by HSBC fell from 50.4 in June to 49.4 in July, which was the first time for the reading to drop below the boom-bust line of 50 since March 2009, meaning that China's manufacturing activities cooled from June to July. HSBC, the largest European bank, said the first sub-50 manufacturing PMI reflected the combined effect of credit tightening, property cooling measures and Beijing's measures to cut capacity in energy-intensive sectors.
 
Meanwhile, China's official manufacturing PMI, issued by the China Federation of Logisitics & Purchasing, managed to stay above the neutral level of 50, at 51.2 in July, down from 52.1 in June. But the July reading is the lowest level of the series in 17 months.
 
Despite the slowing manufacturing sector, economists continued to cast their vote of confidence on the prospect of the Chinese economy. "There is no need to panic because this is just a slowdown, not a meltdown,"  said HSBC in its note, "we still expect the economy to rely on continued investment into ongoing infrastructure projects, public housing construction and resilient private consumption to grow by around 9% in 2H 10 and 2011."