CHINA'S economic slowdown seems to be dragging on longer than many expected. Amid renewed fears of a "hard landing," the government is coming under increasing pressure to do more.

It's not uncommon to hear criticism being bandied about. "Policymakers are ignoring growth risks" or "the government is running out of money."

The release of July economic data seemed to unleash a new level of public anxiety. All eyes are now on official August data, due out in the coming days.

Huang Yiping, an economist at Barclays, said financial markets have become increasingly frustrated about China's economic performance and the government's seeming inactivity.

He calls it "policy paralysis" and is urging the government to take steps quickly to stabilize growth before the situation deteriorates further.

Disappointing data

The list of disappointing data is long.

Widely watched purchasing managers' indexes, which are always the first to come out, painted a bleak picture for August. They showed contraction in the manufacturing sector.

The official Purchasing Managers' Index, compiled by the China Federation of Logistics and Purchasing, slid to a nine-month low of 49.2 from 50.1 in July. It was the first time the index slipped below 50, which is the demarcation between expansion and contraction. The index is weighted toward large state-owned enterprises.

Meanwhile, the HSBC Purchasing Managers' Index, which is slanted toward private and exported-oriented companies, fell to 47.6 in August from 49.3 in July. That was the lowest reading since March 2009.

Zhou Hao, an economist at Australia & New Zealand Bank, said both sets of data raised concerns that government policies implemented so far to spur growth have failed.

ANZ Bank has revised its economic forecasts for growth in China this year to 7.8 percent from 8.2 percent, adding that risk is biased toward the downside.

Yao Wei, an economist at Societe Generale, said the PMI data suggested widespread weakness in China's manufacturing sector. The government is "running a risky policy experiment to see how well the economy can hold up without any big dose of stimuli," she said.

Optimists are indeed few and far between.

Lu Zhengwei, chief economist at Industrial Bank, said he expects most key indicators - including industrial production, fixed-asset investment, retail sales, foreign direct investment and new yuan loans - will show an August weaker than July. The only bright spot, he said, may be a mild recovery in exports after dismal growth of a mere 1 percent in July.

So what is the government doing amid this economic pall, some are asking.

Perhaps it's a bit unfair to answer, "Nothing." It might be more appropriate to say that policymakers just haven't moved in ways everyone was predicting.

Easing policies actually started in March.

For one, the National Development and Reform Commission, China's top economic planning agency, approved more investment projects, both in traditional infrastructure and in new strategic industries.

For another, the People's Bank of China implemented a number of steps, including two cuts in interest rates, a lowering of reserve requirements on banks and the exercise of "window guidance" to encourage credit growth. "Window guidance" refers to official arm-twisting to make sure that banks stick to government policies aimed at encouraging more loans to designated sectors.

Thirdly, the government has been easing restrictions on housing purchases within its broad mandate of reining in speculative home prices without decimating the property market.

There was no change in interest rates or the reserve requirement ratio in August, as many had expected. Instead, the central bank injected at least 400 billion yuan (US$63.5 billion) into circulation through open market operations.

Investment projects

At the same time, a number of local governments announced ambitious investment projects totaling more than 7 trillion yuan. Among them were Tianjin's 1.5 trillion yuan program to build 10 industrial chains before 2016, Chongqing's 1.5 trillion yuan plan for large projects through 2015, and similar ambitious moves in the cities of Guangzhou and Changsha and Guizhou Province.

Some analysts worry that these blueprints may not get off the ground as slowing tax revenues tie the fiscal hands of municipal governments.

Barclays' Huang said the central government may be reticent to announce any ambitious new economic stimulus for fear of reigniting the inflation it battled so hard to knock down last year.

Some analysts are predicting the Consumer Price Index may have bounced back above 2 percent in August from 1.8 percent in July. They point to the recent surges in corn, soybean, wheat and cereal grain prices in the United States, where a severe drought has destroyed harvests.

Globally, food prices jumped about 10 percent in July, the World Bank reported earlier.

China's NDRC has already announced that it will raise minimum purchase prices for mid-season and late rice this year.

Tang Jianwei, an economist at Bank of Communications who is predicting that consumer prices rose 2.3 percent in August, said there are also domestic factors inhibiting growth, such as higher wages and tighter liquidity.

In a recent report, the People's Bank of China said it expects inflation pressure to pick up significantly after August.

So the government may find itself in a bind, analysts said.

If August data remain as weak as July's, or come in even worse, the government may be forced to act, they said.

ANZ Bank's Zhou said he expects another easing of at least 50 basis points in the reserve requirement ratio, saying a 100 basis point cut would not be surprising.

Societe Generale's Yao said China may accelerate policies aimed at boosting household consumption and activity in the services sector. The central bank, she said, may coordinate a policy of "guiding market interest rates lower."

Sun Lijian, an economics professor at Fudan University, said he thinks China should orient its monetary policies toward cutting costs for businesses.

"If reduced interest rates and reserve requirement ratios result in higher prices for land, raw materials and consumables, monetary easing is a flawed option," Sun warned.