As China's fragile economic recovery loses momentum, expectations are growing that Beijing will unleash fresh stimulus to ensure delivery on its growth target of 7.5 percent.
The last month has seen a slew of disappointing economic data – from manufacturing to credit growth – raising concerns that the world's second-largest economy may be headed into a renewed soft patch.
HSBC's preliminary reading of China's manufacturing purchasing managers' index (PMI) for the month of August dipped to 50.3 from July's 18-month high of 51.7, missing forecasts for 51.5.
Meanwhile, lending unexpectedly slowed in July. A broad measure of new credit stood at 273.1 billion yuan ($44.3 billion) the lowest monthly total since October 2008.
Policymakers appear more nervous, particularly on the back of the weak credit growth, and will roll out more measures to bolster the economy, said Dariusz Kowalczyk, senior economist and strategist, Asia ex-Japan at Credit Agricole.
He expects a re-acceleration of fiscal spending, expansion of the pledged supplementary lending program and a relaxation of the window guidance for bank lending.
Last Thursday, he raised his estimate on the likelihood of a system-wide reserve requirement ratio (RRR) cut in the second-half to 35 percent from 25 percent.
In June, the People's Bank of China cut the level of reserves banks must hold for certain banks that have sizable loans to the farming sector and small- and medium-sized firms.
"July will prove to be a bump on the road rather than the beginning of a serious downturn. Perhaps second half will be more difficult than first half was, but China will still achieve its growth target of 'about 7.5 percent'," he said.