Recovery beats expectations, risks still ahead

BEIJING - Chinese decision-makers may breathe a sigh of relief as more macro indicators suggest the economy is recovering stronger than market expectations, despite concerns that an unprecedented anti-corruption drive has weighed on growth.

Both the official and HSBC manufacturing purchasing manager's index (PMI) - a key measure of factory activity in China - reports for July showed signs of positive recovery.

China's non-manufacturing PMI retreats in July

PMI rise signals success of govt support policies

The official PMI released Friday, which samples 3,000 nationwide enterprises of various sizes, reached its highest level in more than two years at 51.7, up from 51 in June. The reading, the fifth consecutive month of recovery, was stronger than the market consensus forecast of 51.4.

The HSBC PMI, which samples 420 small- and medium-sized enterprises, showed similarly positive results reaching 51.7 for July. It indicates the strongest rate of improvement for China's manufacturing sector in a year and a half.

The two PMIs are among the earliest available indicators to gauge operating conditions faced by Chinese manufacturers in July.

The better-than-expected readings suggest the Chinese economy is improving thanks to a series of growth-supportive measures introduced by the government in the second quarter. The measures included investment in railways, urban infrastructure and shanty town renovation projects nationwide.

The two PMIs also suggest that China's economic improvements, starting in June, have continued into July.

Earlier activity data shows a significant increase in China's key macro indicators began in June, including monthly fixed asset investment, industrial production, profit at major Chinese industrial companies and industrial sales.

For the second quarter, China's economy beat market expectations by expanding 7.5 percent year on year and 2 percent quarter to quarter.