Poll sees August PMI at three-month high

China's factory activity in August may have expanded at the fastest pace in three months, a Reuters poll showed Tuesday, adding to evidence that the world's second-largest economy may be stabilizing after slowing for more than two years.

The median forecast of 12 economists polled by Reuters showed China's official Purchasing Managers' Index (PMI) in August may have risen to 50.6 from July's 50.3.

A reading above 50 indicates expanding activity while one below it points to a contraction.

China has stepped up efforts in recent months to prevent a sharp economic slowdown by quickening railway investment and public housing construction and introducing a series of measures to help smaller companies, which could sustain the revival of internal demand in the coming months.

"PMI data for August could further confirm a stabilizing trend of the economy, which is mainly underpinned by infrastructure and property investment," said Nie Wen, an analyst at Hwabao Trust in Shanghai.

A similar, preliminary private sector survey of purchasing managers, sponsored by HSBC and published last week, showed activity in China's industrial sector grew at its quickest pace in four months in August as new orders surged.

The official PMI generally paints a rosier picture than the Markit/HSBC PMI, as it mainly covers big and State-backed companies, while the latter focuses more on smaller firms.

The anticipated uptick in the vast manufacturing sector could also have been boosted by rising domestic demand from inventory rebuilding after significant destocking in the second quarter, analysts said.

The government has been talking about how the economy has stabilized, looking to soothe concerns in global markets about a hard landing for an economy that had slowed for nine out of the past 10 quarters.

A spokesman for the National Bureau of Statistics told a media briefing on Monday that there were positive changes emerging in the economy and the government's 7.5 percent annual growth target is achievable.

Analysts said other figures showing increased power generation and cargo freight for early August could also bode well for economic performance this month, suggesting a rapid economic slowdown may have been arrested.

"We see a big chance of a rebound in the official PMI figure for August, as indicated by stronger power data and recovering cargo transport," said Gao Yuan, an analyst at Haitong Securities in Shanghai.

There remain obstacles to a strong rebound, however, including regulatory tightening of the shadow banking business, on which many small companies still depend for financing.

The official PMI data will be released on September 1. The final reading of the HSBC PMI is due on Monday.