China factory activity at 18-month high as mini-stimulus for No. 2 economy takes effect

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China's manufacturing rose in July to its highest level in 18 months, in a sign that mini-stimulus measures to shore up growth in the world's No. 2 economy have taken hold.

The preliminary HSBC purchasing managers' index rose to 52.0 in July from 50.7 in June on a 100-point scale on which numbers below 50 indicate contraction.

July's reading was the highest since January 2013.

The report said overall new orders and new export orders in China's giant manufacturing industry rose faster in July than the month before. All other categories, including employment and output prices, also improved.

China's economic growth edged up to 7.5 percent in the April-June quarter after slowing in the previous quarter.

Communist leaders in Beijing, who are aiming for full-year expansion of 7.5 percent, have tolerated slower growth as they try to refocus the economy on domestic consumption instead of trade and investment.

Policymakers have resisted calls for sweeping stimulus but have rolled out finely tuned measures when growth seemed poised to slow more sharply than expected.

"We expect policy makers to maintain their accommodative stance over the next few months to consolidate the recovery," said HSBC's chief China economist, Qu Hongbin.

While the mini-stimulus measures have shored up manufacturing growth, "downwards pressure on the economy remains," especially in the slumping housing market, said Julian Evans-Pritchard of Capital Economics. He said he expected further targeted measures to offset the weakness.

The preliminary version of HSBC's index is based on responses from up to 90 percent of 420 manufacturing companies surveyed. The final version is due on Aug. 1.