* Cotton sinks after weak Chinese data
* Chinese cotton sales to depress prices - analyst
* Funds most bullish since January - CFTC

NEW YORK, Sept 4 (Reuters) - Cotton futures fell 2 percent
on Tuesday, after weaker-than-expected Chinese manufacturing
data fed worries about slowing demand from the world's largest
cotton consumer.
The start of a Chinese cotton auction this week also
pressured prices as investors sold on the first trading day of
September, cashing in after prices rallied 8 percent last month.
Data showed slowing new orders weighed heavily on China's
vast manufacturing sector in August -- a sign that the pace of
growth in the world's second-largest economy will weaken well
into the third quarter and possibly beyond.
"Of course there's another quarter to go, but it looks like
this year China could come in under 7 percent growth ... the
lowest since 1997," said Keith Brown, president of commodity
firm Keith Brown and Co. in Moultrie, Georgia.
The benchmark December cotton contract fell 1.58
cents or 2 percent to settle at 75.68 cents per lb, after
dealing between 75.27 and 77.29 cents.
The Chinese government offered 35,708 tonnes of cotton in
the first day's auction, the China Cotton Association said on
Monday.
"It was cotton that was sitting sequestered away and now
it's cotton getting thrown into the marketplace. It only works
to depress prices," said Sterling Smith, commodity strategist at
Citibank's Institutional Client Group in Chicago.
A firmer U.S. dollar also weighed on cotton prices, traders
said.
Softer-than-expected data on U.S. manufacturing data further
eroded risk appetite, boosting the dollar's appeal as a safe
haven for some investors.
Still, non-commercial cotton dealers remain their most
bullish since January, according to Friday's U.S. Commodities
Futures Trade Commission (CFTC). They added just over 3,000 lots
to take their net long to 15,405 lots in the week to Aug. 28.
But demand has been hit by weak retail sales due to a slack
global economy as well as a switch by mills to using
less-volatile synthetic fibers.
"If you look at the fundamentals of cotton, we should be 4
cents from 50 cents, not 4 cents from 80 cents," Brown said.