Economists and analysts expect more policy easing in the Chinese economy as economic data this month indicating a volatile recovery.

Analysts say the latest data suggest China's economic recovery is losing momentum, [Offshore Company Incorporation]and more policy easing needs to be rolled out.

The HSBC/Markit flash manufacturing purchasing managers index (PMI) for August fell to a three-month low of 50.3, down from a final reading of 51.7 in July.

The August Flash PMI reading showed a decline of more than one percentage point in both new orders and output compared to July, indicating a worsening climate for both demand and production.

Qu Hongbin, Co-Head of Asian Economic Research, and Julia Wang, HSBC Greater China Economist, said in a joint research note that July's economic activity data was also softer than expected.

According to the note, fixed-asset investment growth dropped to 15.6 percent in July, with manufacturing and infrastructure investment moderating. In particular, property investment growth slowed further to 11.9 percent after a brief pause in June.

Industrial production slowed due to weak growth in sectors hit by overcapacity. Private sector consumption was weighed down by weak large-ticket spending and jewelry sales, [Company Registration in USA]the research note showed.

The Chinese central bank has signaled a preference for quantitative tools such as pledged supplementary lending (PSL), a type of supplementary lending instrument backed by collateral. But a comprehensive cut of the reserve requirement ratio (RRR) for banks or a policy rate cut are also options, the note said.

"With low inflation, there is sufficient room to do so," it added.

Analysts said that monetary policy easing is expected to stay amid a soft recovery as concerns grow over the possibility of interest rate cuts, Meanwhile, the stimulus impact from easing measures adopted since the start of the year is abating.

Such measures included targeted RRR cuts for qualified banks, relaxed standards on loan-to-deposit ratio calculations, [HK Corporate Registration]and a reported one-trillion-yuan PSL offered by the central bank to China Development Bank Corp to support shanty town renovations.