China a ‘stallion’ amid emerging market turmoil

China stands out like a "stallion" amid the turmoil in emerging markets, according to one strategist, as a slowdown in the world's second largest economy shows increasing signs of stabilization.

"China has been a stallion – in the 1997-1998 Asian financial crisis it played a very stabilizing role, 2008-2009 [global financial crisis], same thing. It is playing a similar role now," Stephen Schwartz, Asia chief economist at Spanish banking group BBVA, told CNBC on Thursday.

"The situation would be much more severe if we had China continuing to slow on top of the QE [quantitative easing] tapering," he added.

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Schwartz pointed to the resilience in recent weeks of the yuan, which has held up in the face of rising concerns about the Federal Reserve unwinding its monetary stimulus. In contrast, emerging market peers such as the Indian rupee and Indonesian rupiah have fallen sharply.

Latest economic indicators, including the HSBC flash manufacturing purchasers mangers index (PMI) for August, are fueling optimism that China should achieve a soft landing for its economy which has slowed in the past two quarters.The PMI, published on Thursday, rose to a four-month high of 50.1 from 47.7 in July, driven by domestic demand and a sharp rise in new orders.

"[The data] confirms that the economy has stabilized in the short term and downside risks for the second-half have declined. Based on this flash PMI, we now see upside risks to our GDP forecast [of 7.4 percent] for the third quarter," said Zhiwei Zhang, chief China economist at Nomura.

In a sign of improving sentiment, China's benchmark Shanghai Composite rose 0.1 percent following the PMI data, bucking the downtrend seen across Asia.

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Ting Lu, China economist at Bank of America Merill Lynch, said in a note on Thursday that he was confident in maintaining his above consensus 7.6 percent and 7.5 percent year-on-year growth forecasts for the third and fourth quarter.

Economists say that the government's recent "fine-tuning" policies - including a mini-stimulus package of fiscal measures and efforts to stabilize interbank lending rates, which spiked in June, are beginning to bear fruit.

In late-July, Beijing unveiled measures to support growth including cutting taxes for some small and micro-sized enterprises and steps to help exporters and speed up railway investment.

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"It's clearly the policy support and policy clarity – I think people are convinced now that the authorities mean business with their 7.5 percent growth target for this year," said BBVA's Schwartz.

—By CNBC's Ansuya Harjani; Follow her on Twitter @Ansuya_H