China's manufacturing activity picks up

Chinese factory worker The increase in factory activity comes as the government looks to stimulate overall economic growth

China's factory activity grew in May at its fastest pace this year, according to government figures, a positive sign amid the wider economic slowdown.

The official purchasing managers index (PMI) hit 50.8 in the month, up from 50.4 in April, the National Bureau of Statistics said. Any reading above 50 indicates growth.

The reading was higher than analysts had expected.

China's government has recently introduced measures to boost growth.

The country's economy grew by 7.4% in the first three months of the year, down from 7.7% growth in the previous quarter.


Last month, another PMI survey by HSBC gave a preliminary reading for May of 49.7, also a five-month high. This survey focuses on smaller companies in the private sector, while the official PMI survey is weighted more towards bigger, state-owned enterprises.

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Policy support will strengthen as the economy weakens further”

End Quote Wang Tao UBS

"The improvement of both PMIs suggest that economic activities have stabilised somewhat due to the recent pro-growth policies," said ANZ bank.

These policies have included extending tax breaks for small and medium-sized companies, and ramping up spending on China's railway infrastructure.

Last week, the government also signalled it would cut reserve requirements for banks in a bid to stimulate lending to certain sectors.

At the same time as announcing the measures, the State Council described the economy as "stable", but added that "downward pressure is still relatively large".

"It is clear that the government has become more concerned about the continued economic slowdown and wants to increase further the strength of policy support," said Wang Tao at UBS in Hong Kong.

"Policy support will strengthen as the economy weakens further, so as to the defend the growth target for 2014."

Earlier this year, Premier Li Keqiang set a target of around 7.5% growth this year.

China's GDP growth has been falling since 2010, when it stood at 10.4%.

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