China's manufacturing activity improved in October, adding to signs the world's second-largest economy might be recovering from its deepest slump since the 2008 global crisis, two business surveys showed yesterday.

 

Manufacturing activities in state-owned enterprises expanded in October for first time in three months. The Purchasing Managers' Index rose to 50.2 in October, up from 49.8 in September and 49.2 in August, the China Federation of Logistics and Purchasing announced yesterday. 

 

Also, HSBC's China Purchasing Managers' Index slanted to private and export-oriented manufacturers rose to an eight-month high of 49.5 from 47.9 in September.

 

The Chinese numbers are rare good news for the world economy, which has slowed as Europe's chronic debt crisis worsened and the US economy stagnated.

 

It's first time since July the official Purchasing Managers' Index climbed above the 50 mark that differentiates expansion from contraction. 

 

The figure, in line with market expectations, adds to signs that China's economy is regaining momentum.

 

"The PMI returned to the territory of expansion last month, suggesting the trend of stabilization and recovery in China's economy has consolidated," said Cai Jin, deputy director of the federation.

 

Cai expects a modest economic recovery in the fourth quarter.

 

All the sub-indexes registered gains except the backlog order index. The production index added 0.8 points to 52.1 while the new order index, which reflects demand, rose 0.6 points to 50.4, scoring above 50 for the first time since May 2012.

 

"The improving indicators showed that China has stepped up fiscal spending, and enterprises' de-stocking process is almost over," said Zhou Hao, an economist with Australia & New Zealand Banking. "The infrastructure projects approved in May will be launched in the coming months, driving up demands for commodities."

 

Zhou said he expected China's annual GDP growth to reach 8 percent if the positive trend continues, and the central bank may maintain abundant liquidity through open market operations.

 

However, Lu Zhengwei, chief economist at China's Industrial Bank, warned that an expansion of production may not last as the backlog order index, a pointer toward firms' future production, is still weak. 

 

Separately, an HSBC report noted improving conditions at the country's private and export-oriented manufacturers, though their manufacturing activities contracted for the 12th consecutive month. The private PMI rose to an eight-month high of 49.5 last month, HSBC Holdings PLC announced yesterday. 

 

October's data confirmed a steady stabilization thanks to the "filtering-through of the earlier easing measures," while the exports outlook remains challenging, said Qu Hongbin, HSBC's chief economist for China.

 

"We expect a continuation of policy easing to further boost domestic demand and counterbalance external weakness, leading to a gradual growth recovery in the coming quarters," Qu said.

 

China's economic growth slowed to an annual rate of 7.4 percent in the third quarter. But September date showed a pick-up in economic activity.

 

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