China manufacturing activity sees sharp rebound

The manufacturing and export sectors have been key drivers of China's economic growth in recent years

China's manufacturing activity rebounded in August, a preliminary survey by HSBC has indicated, easing fears of a slowdown in its economy.

The bank's Purchasing Managers' Index (PMI), a key gauge of the sector's health, rose to 50.1 from 47.7 in July.

A reading above 50 shows expansion. For the first time in four months, the HSBC reading has passed that point.

China has taken various steps in recent weeks to boost its economic growth - which has slowed for two quarters.

Hongbin Qu, chief China economist at HSBC, said that the rebound in sector was in part due to those measures.

"This is mainly driven by the initial filtering-through of recent fine-tuning measures and companies' restocking activities, despite the continuous external weakness," he said.

'Upside surprises'

The data comes amid fears that China's growth rate - which has declined for two straight quarters - may slow further.

The world's second-biggest economy grew at an annualised rate of 7.5% in the April to June quarter, down from 7.7% in the previous three months.

One of the reasons that has played a key role in the slowdown has been the decline in demand for Chinese exports from key markets such as the US and Europe as those economies grapple with their own set of problems.

Prompted by the slowdown in external demand - Beijing has been trying to boost domestic consumption in an attempt to rebalance its economy and sustain high levels of growth.

From the start of this month, China has suspended the value-added tax and turnover tax for small businesses with monthly sales of less than 20,000 yuan ($3,257; £2,125).

The cabinet said the move would benefit more than six million small companies and boost the employment and income for millions of people.

Beijing has also said that it will also implement measures to simplify customs clearance procedures, cut operational fees and facilitate the exports of small and medium-sized private enterprises.

Mr Hongbin added that as the impact of these steps starts to filter through even more, the bank expected "some upside surprises to China's growth in the coming months."