PRELIMINARY DATA for a purchasing managers index released yesterday appeared to show China’s economic expansion was slowing under the weight of Beijing’s anti-inflation campaign and weaker global demand.

China’s economy has grown at an average annual rate of 10 per cent for the past three decades, but there are growing fears of a hard landing based on a number of indicators, such as slowing growth in car sales, a sharp decline in money supply growth and much lower rates of new lending.

Analysts argue a hard landing in the world’s second biggest economy looks unlikely, as urbanisation continues to drive expansion and domestic consumption is beginning to kick in, which helps protect against external shocks.

A purchasing managers’ survey shows growth in the factory sector nearly stalled in June as new export orders fell.

The 50.1 level reported by HSBC and Markit Economics yesterday compares with a final reading of 51.6 in May. A number above 50 indicates expansion.

“The slowdown in Chinese manufacturing signalled by June’s flash PMI was unexpectedly sharp,” said Capital Economics in a research note.

“But the data suggests that price pressures have also subsided. Policymakers should soon have space to loosen credit restrictions, enabling the economy to achieve a soft landing,” it said.

Qu Hongbin, a Hong Kong-based economist at HSBC, said worries about a hard landing were not warranted because the current PMI was at a level consistent with around 13 per cent industrial production growth.

There is no shortage of doomsayers about China’s economic prospects, the most prominent among them US economist Nouriel Roubini, who foresaw the US’s housing crisis.

He believes China faces a “meaningful probability” of a hard landing after 2013, mainly due to over-investment.