(MENAFN - AFP) A key index of China's manufacturing activity rebounded to 50.1 in August, its first month of expansion since April as market conditions improved, HSBC said on Monday.
The British banking giant's purchasing managers' index (PMI) for last month improved from an 11-month low of 47.7 in July and came after three months of contraction, HSBC said in a statement.
It was unchanged from the bank's preliminary reading released last month.
The index tracks manufacturing activity in China's factories and workshops and is a closely watched gauge of the health of the world's second-largest economy. A reading below 50 indicates contraction, while anything above signals expansion.
The government's official PMI for August, released by the National Bureau of Statistics on Sunday, came in at a 16-month high of 51.0.
The August rebound suggested that growth in the sector has started to stabilise thanks to a modest improvement in new orders and output, said HSBC economist Qu Hongbin in the statement.
"This was mainly driven by the initial filtering through of recent stimulus measures and companies' restocking activities," he said.
"We expect some upside surprises to China's growth in the coming months."
Authorities have so far been reluctant to introduce large-scale stimulus measures, but in late July did announce some steps to boost growth, such as reducing taxes on small companies and encouraging railway development.
The first half of this year saw analyst concerns about China's economy mount after an expected rebound from growth of 7.8 percent last year -- the worst performance in 13 years -- failed to materialise.
Growth dipped from 7.9 percent in the final three months of last year to 7.7 percent in the January-March period and 7.5 percent in the second quarter.
China's leaders say they aim to move the economy away from dependency on big ticket investment and instead want consumer demand to become the key growth engine.
Authorities are targeting 2013 growth of 7.5 percent -- the same as the objective set last year.
They see annual growth in the seven percent range as being more sustainable for the future as China's economy matures. As recently as 2011 GDP grew 9.3 percent, and it expanded 10.4 percent in 2010.