Manufacturing in China grew at a faster pace in August after the weakest performance since early 2009 in July, signaling that the economy's slowdown is stabilising.
The purchasing managers' index (PMI) rose to 51.7 from 51.2, exceeding forecasts, a government-backed report showed.
Seasonal factors might have had an effect because the index typically gained as factories restarted following July maintenance, Mizuho Securities Asia said.
A separate PMI released by HSBC and Markit Economics rose to 51.9 from 49.4.
Stocks in Asia advanced after the release offered reassurance that China's moderation in growth is not deepening; any steeper slowdown would hurt a global recovery already hindered by elevated American unemployment.
"China's economic activity is decelerating, albeit gradually, on the way to realising a soft landing," said Shen Jianguang, an economist at Mizuho in Hong Kong. "Investment and production are decelerating less than feared."
The Shanghai composite index, which tracks the bigger of China's two main stock exchanges, retreated 0.6 percent at the close yesterday.
The HSBC PMI for July had showed the first shrinking in manufacturing in 16 months, and the government gauge, published by the Federation of Logistics and Purchasing, was the weakest since February 2009.
Domestic demand could help to support production and boost the economy. China's passenger car sales rose 59 percent in August from a year earlier, more than three times July's pace, the China Automotive Technology & Research Centre said yesterday, helped by higher incentives by dealers.
Production and orders both accelerated last month, the federation's report showed. The output index rose to 53.1 from 52.7 in July. A measure of new orders gained to 53.1 from 50.9 and an export order index climbed to 52.2 from 51.2, according to yesterday's report from the federation.
The US, China's second-biggest trading partner after the EU, said last week that its economy expanded less than expected in the second quarter. China's exports may be hurt by moderation in growth of Europe's services and manufacturing industries last month, as governments stepped up spending cuts to trim budget deficits.
China's gross domestic product grew 10.3 percent from a year earlier in the second quarter, lower than the 11.9 percent in January to March, as Beijing trimmed credit growth and discouraged multiple-home purchases. - Bloomberg