Activity in China's vast manufacturing sector hit a four-month high in August as new orders rebounded, a preliminary private survey showed on Thursday, 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, though it barely passed the watershed 50 line which demarcates expansion of activities from contraction.
"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."
The 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 lingering global uncertainty.
The employment sub-index of the flash PM also picked up in August, but still hovered below the 50 watershed line.
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.
The final HSBC PMI for August is due to be published on September 2, a day after the release of an official government survey.
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, although few analysts see a quick turn-around.
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.
China's annual economic growth slowed to 7.5% in the April-June period from the 7.7 pct in the previous three months - the ninth quarter of slowdown in the past 10 quarters. (Reporting by Kevin Yao; Editing by Kim Coghill)