HSBC's China Purchasing Manager's Index (PMI) soared to an 18-month high in October. The index rose to 55.4 from 55 in September, signaling that the recovery in the country's manufacturing sector has been on a solid footing.

It is the seventh month in a row that the index, compiled by British research firm Markit and released yesterday, has been above the watershed of 50 that divides expansion and contraction.

"We believe the ongoing strong recovery in the manufacturing sector should gain further momentum in the coming months, underpinning strong economic growth in the fourth quarter," said Qu Hongbin, Chief China Economist of HSBC.

He added that "employment in the manufacturing sector rose at the sharpest rate in the history of the survey, which goes back to April 2004 and is designed to provide a timely snapshot of business conditions in industry."

Export orders hit a 28-month high and pre-production inventories rose for the first time since July 2007.

Output and overall orders slipped from September's heights but remained brisk.

By comparison, the National Bureau of Statistics announced on Sunday the country's PMI for September, showed similar strength. The index rose to 55.2 in October from 54.3 in September, marking in eighth consecutive month above the expansionary threshold of 50.

"We continue to hold the view that broad-based macroeconomic tightening is unlikely to materialize in the remainder of the year," said Jing Ulrich, Managing Director and Chairman of China equities and commodities at JP Morgan.

"Until greater inflationary pressure and a sustained recovery in exports become apparent, pro-growth economic policies are expected to remain in place," she said.

(HK Edition 11/03/2009 page4)