July 13 (Reuters) - Credit Suisse upgraded Chinese equities to "overweight" on Thursday and struck a more positive note on the country's economic growth, as it expects stimulus measures from the government amid a drop-off in manufacturing.

A slowdown in the Chinese economy has raised concerns about global outlook as waning demand from the country has seen ripple effects across developed and emerging markets.

China's blue-chips equity index is only up about 0.7% so far this year, compared with a near 8% jump in India's Nifty 50 index and a 2.8% rise in MSCI's index of Asian shares excluding Japan.

"The recent slowdown seems to be partly because China is a very manufacturing-oriented economy and was hit as global goods consumption slowed sharply," wrote Credit Suisse analysts led by Andrew Garthwaite in a note.

With the Chinese government's official growth target of 'around 5%' now at risk, Credit Suisse analysts expect a policy response.

"We don't see systematic risks yet because property prices are not falling, and credit spreads are still low. The main concern is whether excess capacity causes deflation," the analysts added.

Credit Suisse is bullish on Chinese equities as it sees a sharp rise in excess liquidity, which the analysts note is already starting to improve.

"Chinese equities are discounting a very sharp fall in PMIs of 5 points that we do not think will happen," they noted, adding that stocks were attractively valued amid light positioning.

They note an oversold airlines industry and cheap tech stocks which have been seeing improved earnings revisions, highlighting Alibaba post its decision to split into six.

(Reporting by Priyadarshini Basu and Susan Mathew in Bengaluru; Editing by Krishna Chandra Eluri)