China's manufacturing activity at 18-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 grew at its fastest pace in 18 months in October, adding to signs of a recovery in the world's second-largest economy.

The official Purchasing Managers' Index (PMI), a gauge of the sector's health, rose to 51.4 from 51.1 in September.

Manufacturing is a key driver of China's growth and a PMI reading above 50 indicates expansion in the sector.

The data comes just weeks after China reported its economic growth picked up speed in the July-to-September period.

Its economy grew 7.8% in the quarter from a year earlier, up from the 7.5% expansion recorded in the previous three months.

The pick up in the pace of growth was the first in three quarters.

Official figures released last month also showed growth in industrial output, retail sales and fixed asset investment.

Start Quote

We expect GDP growth to comfortably exceed the government's bottom line in the coming quarters”

End Quote Louis Kuijs Royal Bank of Scotland.
'Comfortably exceed'

After years of blistering growth, China has seen its pace of expansion slow recently.

China has set a growth target of 7.5% for the year.

Analysts said the latest numbers indicated that it was likely that Beijing would meet this.

"This is in line with our relatively benign growth outlook," said Louis Kuijs, an economist at Royal Bank of Scotland.

"With global demand momentum likely to pick up gradually and domestic demand growth remaining solid, we expect GDP growth to comfortably exceed the government's bottom line in the coming quarters."

Mr Kuijs added that he expects China's economy to expand 7.7% in the current year.

A separate PMI reading released by HSBC, which looks at relatively smaller firms, also indicated an expansion in the sector.

The HSBC PMI reading rose to 50.9 in October, from 50.2 in September. It is the strongest improvement in the HSBC index in seven months.

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