Manufacturing Tipped to Continue Losing Ground
China's manufacturing activity may have slowed to an 11-month low in July as new orders fell and the jobs market remained weak, according to a preliminary gauge compiled by HSBC. The flash HSBC/Markit China Purchasing Managers' Index for fell to 47.7 in July from June's final reading of 48.2, a third straight month below the 50 critical point that divides expansion and contraction compared with a month earlier. The employment sub-index dropped to 47.3 in July, the lowest since March 2009. "The lower readings suggest a continuous slowdown in the wake of fewer new orders and faster destocking," said Qu Hongbin, HSBC chief China economist.

China to Offer Subsidies to Ease Cotton Shortage
The Chinese government is working on policies to subsidize cotton farmers to help ease the current supply shortage of the crop, said Gao Yong, deputy director of China Textile Industry Association. A pilot program is expected to kick off soon in the northwestern region of Xinjiang before being carried out nationwide. Cotton sales from the state reserve were poor, with less than a quarter of the 12.1 million tons offered sold on July 16 because the price was too high (19,000 yuan/ton) for so-so quality, according to the China Securities News.

Copper Demand Weakens
China's copper demand is falling as operating rates of copper tube fabricators have declined sharply from 90% in May to 78% in June, driven by seasonality and recently tightened credit, HSBC said in a research report. Spot premium for imported cathodes dropped from $195/ton in early July to $173/ton recently, which the bank believes was driven by softened demand from downstream sectors. Copper inventories in Shanghai bonded warehouses rose from 400,000 tons in end June to 450,000 tons recently.

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