China manufacturing hits 18 month high

China's manufacturing sector grew in October at its fastest rate in 18 months, according a document published by HSBC Bank.

China’s manufacturing sector grew in October at its fastest rate in 18 months, according a document published by HSBC Bank.

The purchasing managers index (PMI) from the state-sanctioned China Federation of Logistics and Purchasing rose from 54.3 in September to 55.2. A reading above 50 indicates an expansion.

The survey is a further sign of the strength of the recovery in the Chinese economy, which grew at an annual rate of 8.9% between July and September.

”The ongoing strong recovery in the manufacturing sector should gain further momentum in the coming months,” said Qu Hongbin, the chief China economist at HSBC in Hong Kong.

October is the eighth month in a row that the sector has expanded, after six months of decline.

“These figures show that China’s economic growth will accelerate in the future,” said Zhang Liqun, an economist at the State Council Development Research Centre.

He added that the economy would likely grow by 9.5% in the final three months of the year.

China’s strong recovery has been aided by government stimulus packages, similar to those put in place by other major world economies.

At the end of 2008, the government announced a 4 trillion yuan stimulus plan involving increased spending on infrastructure, such as rail and roads, to boost the domestic economy as exports slumped.

“China’s recovery has been impressive, but has been heavily reliant on government-directed investment,” said Brian Jackson at the Royal Bank of Canada in Hong Kong.

But economists believe that even without state aid, China’s economy will grow.

“External demand will provide an additional source of support for growth in the months ahead,” said Mr Jackson, before adding that the government may begin scaling back its support “from early 2010”.

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