Orders rise as Chinese economy strengthens

A Chinese manufacturing index rose to a 16-month high in August as new orders rose, adding to evidence growth in the world's second-largest economy is strengthening after a two-quarter slowdown.

The Purchasing Managers' Index was at 51.0, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on Sunday. That compared with July's 50.3 level. Readings above 50 indicate expansion.

The report bolsters confidence the economy is responding to Premier Li Keqiang's policies to support growth amid a crackdown on shadow banking.

"It's becoming more clear that the economy is stabilising," Zhang Liqun, a researcher with the Development Research Centre, which advises China's cabinet, said. "Market expectations are improving and companies are adapting better to the changing environment."

The Shanghai Stock Exchange Composite Index rose 2 per cent last week, the biggest gain since March. The latest PMI figure is the highest since April last year.

A sub-index of new orders rose to 52.4 from 50.6 the previous month, a gauge of new export orders rose above the 50 line that divides expansion from contraction for the first time since March, and an output reading rose to 52.6 from 52.4.

The preliminary reading of a separate manufacturing index released by HSBC and Markit Economics late last month showed the first expansion since April.

China's government in March set a 2013 growth goal of 7.5 per cent. It has a target for an average 7 per cent expansion through 2015. GDP increased 7.5 per cent in the April-to-June period from a year earlier, down from 7.7 per cent in the first quarter, extending the longest streak of sub-8 per cent expansion in at least two decades.