China's manufacturing activity at 16-month high

Worker at a steel factory in China China's manufacturing sector has been a key driver of its economic growth

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China's manufacturing activity picked up speed in August, hitting a 16-month high, allaying some fears of a sharp slowdown in its economy.

The official Purchasing Managers' Index (PMI) rose to 51 from 50.3 in July.

The PMI is a key gauge of the sector's health and a reading above 50 indicates an expansion.

China, the world's second-largest economy, has taken various steps to boost its economy after its growth rate slowed for two quarters in a row.

"We are seeing clearer signs of economic conditions improving," said Haibin Zhu, chief China economist at JP Morgan in Hong Kong.

'Concrete policy announcement'

China's economy expanded by 7.5% in the April to June quarter from a year earlier - down from a growth rate of 7.7% in the previous three months.

There have been concerns that its growth rate may slow further in the coming months, not least because of a slowdown in demand for Chinese exports from key markets such as the US and Europe.

That has hurt China's manufacturing and export sectors, which are key drivers of its economic growth.

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

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

The decision is expected to benefit more than six million small companies and boost employment.

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

Mr Haibin said, "the recent shift in the policy stance and more concrete policy announcement" had been a key reason behind the recovery in the sector.

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