China's manufacturing sector is gradually gaining strength and paving the way for a steady economy, two surveys showed Friday, though mixed signals remain in areas including new orders.
China's official Purchasing Managers' Index (PMI) reached 51.4 in October, hitting an 18-month high led by strong output, according to data from the National Bureau of Statistics, beating market expectations.
A separate HSBC final PMI in October also rose to 50.9, the highest since March this year.
Both survey results stayed above the 50 mark that separates expansion from contraction of manufacturing activities. The official PMI covers 3,000 enterprises of different sizes nationwide while HSBC's PMI focuses on small and medium-sized enterprises, especially in coastal areas.
"The October PMI readings indicate that the economy is starting to stabilize," Zhang Liqun, an economist at the Development Research Center of the State Council, a government think tank, told the Global Times on Friday.
The manufacturing sector has bottomed out, and the accelerated production will push up the demand for labor and help improve consumption in the future, Qu Hongbin, chief China economist at HSBC in Hong Kong, wrote in his Weibo on Friday.
"The pickup in the official and the HSBC PMIs, however, do not change our view of an easing in momentum down the road," Chang Jian, an economist at Barclays Capital, told the Global Times in a research note sent on Friday.
New orders and new export orders in the official PMI fell by 0.3 percentage points in October, suggesting slower demand growth in the coming months.
A divergence among different sized manufacturers also emerged. The official PMI of large and medium-sized manufacturers remained above the 50 mark and both rose from a month ago, while smaller firms' PMI reading is 48.5 for October, down 0.3 percentage points compared with September.
The strong rebound over July and August, which benefited from a shift in government policy focus to "stabilizing growth" and industrial restocking, will not be sustained especially in view of a soft external recovery, Chang said.
She also estimated that another key indicator - industrial production growth - in October will slow down, whose data is set to be released on November 9.
The effect of pro-growth policies is expected to last till mid 2014, Niu Li, a senior economist at the State Information Center, another government think tank, told the Global Times on Friday.
Challenges including swelling local government debts and rising financial risks will constrain policy options from either loosening or tightening next year, he estimated.
With the current stable economy, acceptable job market conditions and inflation under control, it is a good time for China to restructure its growth model toward a consumption-led economy, and important reform decisions are expected at the Third Plenary Session of the 18th Communist Party of China Central Committee to be held between November 9 and 12, Niu said.
