Activity in China's vast manufacturing sector hit a four-month high in August as new orders rebounded, a preliminary private survey showed today, reinforcing signs of stabilisation in the world's second-largest economy.
The Flash HSBC Purchasing Managers' Index rose to 50.1 from July's final reading of 47.7, which was the weakest in 11 months.
But the increase barely passed the watershed 50 line which separates an expansion of activities from contraction.
The Chinese government has announced a series of targeted measures to support the slowing economy, including scrapping taxes for small firms, offering more help for ailing exporters and boosting investment in urban infrastructure and railways.
A sub-index measuring new orders rose to a four-month high of 50.5 in August from 46.6 in July. But the sub-index on new export orders edged lower in a reminder of weak global demand.
The employment sub-index of the flash PMI also picked up in August, but still hovered below the 50 watershed line.
"This is mainly driven by the initial filtering-through of recent fine-tuning measures and companies' restocking activities, despite the continuous external weakness," said Hongbin Qu, chief China economist at HSBC.
"We expect further filtering-through, which is likely to deliver some upside surprises to China's growth in the coming months,'' he added.
The flash HSBC PMI, compiled by Markit Economics Research, is the earliest available indicator of monthly activity in the Chinese economy, and tends to focus more on small to mid-sized firms in the private sector.
Analysts forecast annual Chinese GDP growth of 7.4% in the third quarter and the full-year growth of 7.5%, in line with the official target.
Like some of its emerging market neighbours, China saw capital outflows for the second consecutive month in July, suggesting its sluggish economy is still deterring investors. But the pace at which money is leaving the country appears to be slowing and its markets have not been as volatile as in India or Southeast Asia.
The final HSBC PMI for August is due to be published on September 2, a day after the release of an official government survey. The official PMI, which focuses on big and state-owned firms, has been generally rosier than the private survey, which targets small and private companies.
Annual profit growth in China's state firms picked up pace in the first seven months of 2013, official data showed earlier this week, offering new signs that the economy may be regaining momentum in the second-half of the year.
Upbeat data for July ranging from factory output and exports to retail sales has raised hopes that China's economy may be stabilising after slumping for more than two years.
Chinese leaders, while making clear they will accept some economic slowdown as they push through reforms, have expressed confidence of meeting their 7.5% growth target this year - which would be China's slowest growth in 23 years.
Annual economic growth slowed to 7.5% in the three months from April to June from the 7.7% in the previous three months - the ninth quarter of slowdown in the past 10 quarters.
