China factory report points to stabilizing economy

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Factory activity in China appears to have picked up in August, according to an initial report from HSBC.

China's factories have picked up the pace in August, the latest sign that growth might be stabilizing in the world's second-largest economy.

HSBC said Thursday that its "flash" index of manufacturing purchasing managers' sentiment rose to 50.1 in August, the highest level in four months.

The index had languished below 50 for months, and July's final reading was 47.7. Any number over 50 indicates an acceleration in manufacturing activity.

Steadying growth in China's vast manufacturing sector, seen as an economic bellwether, could lighten the burden for a government that has been under pressure to stimulate the economy.

The economy expanded at an annual rate of 7.5% last quarter, and many economists had projected even slower growth during the second half of the year.

"China's manufacturing growth has started to stabilize on the back of modest improvements of new business and output.," said HSBC economist Hongbin Qu.

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Qu said the improved data was driven by Beijing's recent "fine-tuning" stimulus measures, which are "likely to deliver some upside surprises to China's growth in the coming months."

China's stock markets had mixed reactions to the data, with the Shanghai Composite advancing 0.2%, while Hong Kong's Hang Seng Index pared earlier losses.

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The HSBC report comes at the heels of a slew of positive economic data from July.

Inflation remained subdued at 2.7%, below the government's annual inflation rate goal of 3.5%. Industrial production and trade figures were also better than expected, adding another positive sign to the mix.

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