China's manufacturing activity may record a four-month high in August as the central government's stabilizing measures started to take effect, a survey showed today.

The HSBC Flash China Manufacturing Purchasing Managers' Index, the earliest available indicator of [Hong Kong company registration] operating conditions at private and export-oriented industrial companies, settled at 50.1 this month, up from July's final reading of 47.7, which was the lowest in 11 months. A reading above 50 indicates expansion.

Qu Hongbin, chief economist for China and co-head of Asian Economic Research at HSBC, said new business and output are driving the recovery of manufacturing, which may continue to pick up in the coming months.

"This is mainly driven by the initial filtering-through of recent fine-tuning measures and companies' restocking activities, despite the continuous external weakness," Qu said. "We expect further filtering-through, which is likely to deliver some upside surprises to China's growth in the coming months."

Data for July showed upbeat results from factory output and exports to retail sales, raising hopes that China's economy [Set Up Company Hong Kong]may be stabilizing after slumping for more than two years.

China's economy expanded 7.5 percent from a year earlier in the second quarter of this year, slowing further from the pace of 7.7 percent in the first three months, reflecting a weakening recovery that may put the government's efforts on reform to the test.