The HSBC China manufacturing PMI climbed to 50.1 in August in line with expectations.
The Flash PMI had jumped to a four-month high of 50.1 in August. This was up from an 11-month low of 47.7 in July.
But a look at the sub-indices showed that external demand remains weak. New export orders fell for the fifth straight month, and at a slightly quicker pace than that in July.
And the sub-index on employment wasn't much better, with employment levels decreasing for the fifth straight month but at a slower pace.
"This implies that growth in China's manufacturing sector has started to stabilize on the back of a modest rebound of new orders and output," said Hongbin Qu, HSBC chief economist, China, in a press release.
"This was mainly driven by the initial filtering through of recent stimulus measures and companies’ restocking activities. We expect some upside surprises to China's growth in the coming months."
Meanwhile, official manufacturing PMI climbed to 16-month high of 51 in August. A reading below 50 signals contraction.
While the official series is still performing better than the HSBC series, both show an improvement in China's manufacturing sector.
China has said that is has suspended industry-specific data from its official PMI report because they couldn't "ensure all industry-specific data can reach accuracy requirements," according to a statistics agency official.
"The official PMI report painted a picture of a domestic demand-led recovery," Societe Generale's Wei Yao said in a note after the official PMI release. "Although we remain cautious of the sustainability of this recovery, given such a momentum, data in the next two months will probably continue on a positive trend."
With China's Q2 GDP slowing to 7.5% and rising concerns about the health of the Chinese economy, Premier Li Keqiang said 7.5% would be the growth floor for 2013.
Here's a look at the trajectory of HSBC PMI:
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