"What we had in China is stress in the financial system and that affects smaller companies more than state owned enterprises. Official PMI is more skewed to larger companies and the HSBC figure reflects the smaller companies and that is where you get this divergence," he added.
(Read more: China is worst metric to gauge China: Stephen Roach)
There have been increasing concerns of a credit squeeze in China in recent months, which saw the the benchmark seven-day repo rate surge to a record high of 11.2 percent in June.
On Tuesday, China's central bank attempted to ease tightening liquidity conditions by injecting cash into local money markets, after the repo rate spiked to 5 percent. The rate is currently holding at the 5 percent handle.
According to HSBC's Neumann, more stimulus measures will be coming.
(Read more: China acts to ease credit crunch – why the change of heart?)
"I think they [authorities] are getting cold feet. One of the risks is that the stress in the interbank market that you saw in past couple of months that hasn't completely vanished is impacting financial conditions, leading to further downside risk for growth," he said.
"So, I do think stimulus is needed. They are already being more supportive at least in rhetoric and that's what's really required to put a floor under growth," Neumann added.
— By CNBC's Li Anne Wong. Follow her on Twitter: