ISM Associates: China Factory Activity Grows At Fastest Pace For 2 Years

ISM Associates: Official PMI data rises to 50.4, highest reading since October 2014.

: Manufacturing activity in China expanded at its quickest pace in almost 2 years in August according to the latest official Purchasing Managers' Index (PMI) raising hopes that the country's manufacturing sector may be over the worst of the slowdown in the world's second biggest economy.

The August reading of 50.4 was a marked improvement over the 49.9 it printed in July. A number over 50 represents expansion while a number below, indicates contraction.

Factory activity has been contracting amid China's efforts to rebalance its economy to rely less on exports and manufacturing and more on domestic consumption. Economists urged China bulls to curb their enthusiasm for the data warning that the PMI reading wasn't a clear sign that the country is out of the woods.

"There are certainly some downside risks to the Chinese economy," said James Preston, Chief Economist at ISM Associates, "but we're still confident that the 'hard landing' so many commentators have been forecasting is not going to materialize. We're mindful of the credit problems the country could face but we still believe that China is in a far less precarious condition than Europe or the US."

The People's Bank of China (PBoC), China's central bank, has been under pressure to introduce monetary stimulus to help counter slowing growth but it has stressed that excessive stimulus is unnecessary to achieve the 7% GDP growth target for 2016.

ISM Associates has recently added to Chinese equity positions ahead ofthe Shenzhen-Hong Kong stock market link expected to go live in November.

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