The Australian dollar jumped and Asian shares pared early losses after the PMI report but investors remained wary of negative fallout for Asia if the U.S. central bank begins to taper back its massive stimulus programme as early as next month. Copper rose and crude oil prices bounced off early lows.
NO QUICK RECOVERY IN SIGHT
Analysts in a Reuters poll forecast annual GDP growth of 7.4 percent in the third quarter and the full-year growth of 7.5 percent, in line with the official target.
But Zhang at Nomura said he saw upside risks to his 7.4 percent GDP forecast for the third quarter as growth may pick up from the 7.5 percent pace in the second quarter.
"Nonetheless we believe a strong H2 recovery to above 8 percent is unlikely, as rising interest rates will pressure investment. We still expect growth to slow to 6.9 percent in 2014."
Fan Jianping, chief economist at the State Information Centre, a top government think-tank, said annual economic growth may hover around 7.5 percent in the third and fourth quarters of 2013.
"As long as China's growth rate remains above 7 percent, there will be no crisis. Double-digit growth is not in line with China's new reality," he told reporters on Wednesday.
Like some of its emerging market neighbours, China saw capital outflows for the second consecutive month in July, suggesting its sluggish economy is still deterring investors. But the pace at which money is leaving the country appears to be slowing and its markets have not been as volatile as in India or Southeast Asia.
The final HSBC PMI for August is due to be published on Sept. 2, a day after the release of an official government survey. The official PMI, which focuses on big and state-owned firms, has been generally rosier than the private survey, which targets small and private companies.
Upbeat data for July ranging from factory output and exports to retail sales has raised hopes that China's economy may be stabilising after slumping for more than two years.
Chinese leaders, while making clear they will accept some economic slowdown as they push through reforms, have expressed confidence of