HSBC: China's Manufacturing Hits 7-month High

Manufacturing activities in China increased to a seven-month high in October, according to HSBC'S preliminary purchasing managers' index (PMI) on Thursday.

The HSBC Flash Manufacturing PMI for October rose to 50.9. The reading compared with a final recording of 50.2 for September, HSBC said in a report. The 50.9 figure is the highest since April.

The October figure, the earliest reading of China's monthly economic performance, further confirmed a gradual recovery in the world's second-largest economy.

Qu Hongbin, chief China economist with HSBC, said the country's growth recovery was becoming consolidated into the fourth quarter.

The momentum is likely to continue in the coming months, creating favorable conditions for speeding up structural reforms, Qu said.

In the first nine months of the year, China's economy rose 7.7 percent from a year earlier, keeping the country on track to meet its 7.5-percent annual growth target for 2013. Third-quarter GDP growth rebounded to 7.8 percent from 7.5 percent in the second quarter and 7.7 percent in the first quarter.

However, many economists remained concerned about a softening momentum in September, which was indicated by slower growth in industrial output, fixed asset investment and retail sales. Sluggish global demand also weighed on growth, with exports unexpectedly down 0.3 percent year on year last month.

"Despite the rise of this flash PMI reading, we believe sequential GDP growth peaked in the third quarter at 2.2 percent and people should expect moderation to a more sustainable growth at between 1.8 percent and 2 percent in the fourth quarter," said Lu Ting, chief China economist with Bank of America Merrill Lynch.

Lu expects year-on-year GDP growth to be 7.7 percent in the fourth quarter from 7.8 percent in the third quarter.