(June 27): The earliest indicators for China’s economy in June signal that the manufacturing sector may be poised to decelerate, while other challenges loom in the second half of this year.

Small- and medium-sized enterprises showed the lowest level of confidence in 16 months, a gauge of manufacturing drawn from satellite imagery slumped, and conditions in the steel business remained lacklustre. There’s some good news though: sales-manager sentiment remains positive.

Output in the world’s second-largest economy has softened in the second quarter after a strong start to the year, with investment slowing, some credit becoming tighter and evidence emerging that administrative curbs on the property market are starting to bite. If the slowdown worsens in the coming months, the government’s resolve to curb risk in the banking sector could be tested during a period of leadership transition in Beijing.

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