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China HSBC PMI shows economic recovery intact

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China's manufacturing sector picked up further steam in September, a preliminary survey of factory managers showed on Monday, a sign that the country's economic recovery is gaining traction.

The HSBC flash Purchasing Managers' Index (PMI) hit a six-month high of 51.2, from a final reading of 50.1 in August, moving further above the key 50 mark that divides expanding activity in the sector from a contraction.

"The HSBC Flash China Manufacturing PMI [adds] further evidence to China's ongoing growth rebound. The firmer footing was supported by simultaneous improvements of external and domestic demand condition," said Hongbin Qu, chief China economist and co-head of the Asian economic research team at HSBC.

(Read more: China economy coming up trumps)

"We expect a more sustained recovery as the further filtering-through of fine-tuning measures should lift domestic demand. This will create more favorable conditions to push forward reforms, which should in turn boost mid- and long-term growth outlooks," he added.

The new export orders sub-index rose to a ten-month high of 50.8, up from August's 47.2, reflecting a pick-up in external demand for the country's goods.

Meanwhile, stocks of raw material purchases and finished goods also rose, which suggests that inventory restocking is also a driver of the recovery, according to economists.

(Read more: Goldman upgrades China growth, cuts India outlook)

The improvement in HSBC's manufacturing survey – which is weighted towards small and medium-sized companies – follows a jump in the official PMI reading to 51.0 in August from 50.3 in July.

Positive economic data out of the world's second largest economy has raised expectations of a growth rebound in the third quarter, from the previous three months.

"[The data] supports our call that there has been a strong sequential economic rebound since late July. We expect headline year-on-year GDP growth could jump to 7.9 percent in the third quarter from 7.5 percent in the second quarter," said Ting Lu, China economist at Bank of America Merrill Lynch.

Contact Asia Economy


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