The official purchasing managers index (PMI) hit 51.7 last month, the National Bureau of Statistics said in a statement. The figure was up from 51.0 in June and the best since 53.3 in April 2012. It was also above the median 51.4 forecast in a survey of nine economists by The Wall Street Journal.
"We are optimistic about China's economic outlook in the remainder of this year, as the growth momentum is picking up while the inflation remains mild," ANZ Bank economists Liu Li-Gang and Zhou Hao said in a note reacting to the survey.
The index tracks manufacturing activity in China's factories and workshops and is a closely watched indicator of the health of the economy. A reading above 50 indicates growth, while anything below points to contraction. China's official PMI data came after British bank HSBC last week announced a jump in its survey to a preliminary reading of 52.0 for July, its highest since January 2013. The final figures are due to be released on Friday.
Qu Hongbin, HSBC's chief China economist, said small revisions to several sub-indices brought the number down from the preliminary figure. "Nevertheless, the economy is improving sequentially and registered across-the-board improvement compared to June," he said in a press release accompanying the data. Policy makers are continuing with targeted easing in recent weeks and we expect the cumulative impact of these measures to filter through in the next few months and help consolidate the recovery."
Chinese authorities have since April introduced a series of measures to bolster growth, including tax breaks for small enterprises, concentrated infrastructure outlays, and incentives to encourage lending in rural areas and to small companies.
Chinese economic growth accelerated to a higher-than-expected 7.5 per cent in the second quarter, up from 7.4 per cent in the previous three months, which was the worst since a similar 7.4 per cent expansion in July-September 2012. Chinese authorities have since April introduced a series of measures to bolster growth, including tax breaks for small enterprises, targeted infrastructure outlays and incentives to encourage lending in rural areas and to small companies.
China in March set its annual growth target for this year at about 7.5 per cent, the same as last year.