China's economic growth is at a critical stage of leveling off after government's efforts to cool the property market and slow bank lending
China's manufacturing growth eased further last month amid Beijing's efforts to cool the property market and slow bank lending.

The country's purchasing managers' index fell for the second month in June, indicating that manufacturing activity expansion is moderating.

The official PMI fell to 52.1, from 53.9 in May, while that of HSBC (0005) dropped more steeply to a 14-month low of 50.4, from 52.7. Both indexes, however, stayed above the expansionary threshold of 50.

Government economist Zhang Liqun said yesterday that the official index pointed to a "steady slowdown" in the broader economy.

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"China's economic growth is at a critical stage of leveling off after the climb," he said.

Qu Hongbin, chief economist for China at HSBC, said the slower sequential growth in the manufacturing sector was partly due to the tightening measures taking effect. "But fears about a hard landing are overplayed." Qu believes China will still post growth of around 9percent in the second half on the back of massive ongoing investment and robust private consumption.

JPMorgan Chase Bank China economist Wang Qian believes that Beijing will become increasingly concerned about the prospects for the export sector and expects an interest rate hike in the third quarter.

Wang also expects the yuan to continue appreciating gradually and forecast the exchange rate against the US dollar to reach 6.6 by year- end.

Bank of America Merrill Lynch Hong Kong economist Lu Ting, on the other hand, says the PMI fall is partly because of insufficient seasonal adjustment.

Lu also believes that policymakers will not take the PMI decline too seriously, adding that his bank is maintaining its GDP growth forecast at 10.1 percent for this year and 9 percent for 2011.