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Caixin China August manufacturing PMI hits 6-month high on strong demand

Key Points
  • The Caixin/Markit manufacturing Purchasing Managers' Index for August came in at the six-month high of 51.6
  • That metric focuses on smaller businesses in China compared to the official PMI reading
A worker cutting fake 'branches' into pieces at a artificial Christmas tree factory in Yiwu city, located in the Zhejiang province of China.
Johannes Eisele | AFP

A survey focused on small and mid-size businesses in China topped expectations on Friday, due to the strongest increase in new business in over three years.

The Caixin/Markit manufacturing Purchasing Managers' Index for August came in at the six-month high of 51.6, topping expectations. Analysts surveyed by Reuters had expected the reading to dip slightly to 50.9 in August from 51.1 in July.

A reading above 50 indicates expansion, while a reading below that signals contraction.

Caixin and IHS Markit said in a statement that foreign demand was the key driver of new order growth, as export sales rose to the greatest extent in over seven years.

"As a result, companies expanded their production schedules and buying activity, while business confidence rose to its highest for five months," the statement added.

As a major manufacturer and exporter, China is currently operating in a favorable global economic environment, said Ajay Kapur, Bank of America Merrill Lynch's head of strategy for Asia Pacific and growing emerging markets.

"The world economy is in a pervasive growth mode where 85 percent of the countries that we track in the world have PMIs that are above 50. That's very, very high and I expect that to continue," he told CNBC's "Squawk Box."

China reported Thursday that its official manufacturing Purchasing Managers' Index for the month of August came in above expectations at 51.7 due to strong production and domestic demand.

Compared with the official PMI, the Caixin/Markit survey tends to focus more on small- and mid-sized manufacturers.

China's manufacturing sector has been posting solid growth thanks to domestic infrastructure spending and a recovery in exports. That has mitigated some concerns about slowing growth and high debt levels that could derail the world's second-largest economy.