Preliminary July data suggests that manufacturing activity in China contracted for the first time in one year. The HSBC preliminary purchasing managers index (PMI) fell to 48.9 in July from 50.1 in June. A reading above 50 indicates expansion of manufacturing activity while a reading below 50 indicates contraction. The July reading, which is likely to be revised when HSBC publishes official figures on August 1, was the lowest PMI reading since July 2010.  HSBC’s chief economist said that industrial growth in China is expected to decelerate as the government’s economic tightening measures work through the system. However, China’s economy will still likely expand by 9 percent for the rest of the year due to strong consumer spending and investment in infrastructure projects. The data also indicates that small- and medium-sized businesses had been hit hard by Beijing’s campaign to curb bank lending.

China’s Vice Premier Li Keqiang said the country is likely to meet its target to begin construction on 10 million units of low-cost housing this year. In a statement on the government’s website, Li said the government has boosted financial support for affordable housing, though no details were provided. China’s State Council said last week that the country had begun construction on more than 5 million units, though many analysts doubt this figure. Credit Suisse analysts said that by May construction had begun on only 34 percent of the targeted 10 million units. The government’s plans to build low-cost housing have been stymied by a funding shortfall and China’s top economic planning body, the National Development and Reform Commission, recently said that it would accelerate the approvals of bonds for public housing. Li added that China would have to speed up its reconstruction of slums and provide more affordable rental units.

South Korean regulators are concerned that a sagging property market could affect profitability in the country’s banking sector. Officials from the Financial Supervisory Service recently met with bank executives to discuss lenders’ ability to absorb losses from bad loans. A continued downturn in the country’s real estate sector has led to an increase in distressed loans for real estate financing projects. South Korea’s banking sector had KRW6.7 billion (USD6.3 billion) in distressed loans from property projects at the end of March.

Taiwan’s export orders in June rose 9.18 percent year over year to USD37.36 billion, driven by shipments of technology products such as smart phones and mobile communication devices. Export orders are an indicator of shipments one to two months ahead. Mainland China was Taiwan’s No. 1 market, accounting for 25.2 percent of June’s orders. The US accounted for 23.6 percent of orders, a record high for the country. June’s increase in export orders represented a decline from the 11.53 percent year-over-year growth in export orders recorded in May.

Russia’s economic growth slowed in the second quarter, though government officials expect the pace to accelerate in the second half of 2011. The country’s gross domestic product grew by 3.7 percent year over year in the second quarter, compared to 4.1 percent yearly growth in the first quarter. The government did not provide a reason for slowing growth. Deputy Economy Minister Andrei Klepach said, “We expect a pickup in growth in the second half, in parts thanks to demand-driven investment.” He added that agricultural output will be better this year compared to last year, when the worst drought in decades wiped out harvests.