China’s manufacturing activity has risen to an 18-month high

China’s manufacturing activity grew at its fastest pace in 18 months in July, an initial survey by HSBC showed, the latest in a series of signs that the country’s economy may be stabilizing thanks to recent steps China has taken in recent months to help boost its economy.

The bank’s purchasing managers’ index, a gauge of the sector’s health, rose to 52 in July, from 50.7 in June. A reading above 50 shows expansion. It is the second successive month in which HSBC’s PMI has been above that level.

The reading cheered markets in Asia. Hong Kong stocks rose modestly to hit their highest level in more than three years. The Shanghai market was moderately higher in morning trading after the data was released.

Economists said the reading was surprisingly strong and credited the government’s efforts to ease monetary policy and speed up infrastructure investment. “The strong flash PMI points to the robust growth momentum in the world’s second-largest economy due to the government’s stimulus measures,” said Lu Ting, an economist at Bank of America Merrill Lynch.

Earlier this month, China reported that its economy expanded by 7.5%, in the April-to-June quarter, from a year ago, up from 7.4% growth in the previous three months. Other data released in recent weeks has shown that factory output rose 9.2% in June, from a year earlier, while fixed asset investment jumped 17.3% in the first six months of the year.

Meanwhile, retail sales in June were 12.4% higher than a year ago, indicating that domestic consumption was picking up. The slew of positive data has followed a series of measures in recent months by policymakers to help boost China’s growth.

China has refrained from using massive stimulus measures, as it did during the global financial crisis in 2008 to 2009. Instead, it has rolled out a raft of small stimulus policies, including cutting the amount of cash banks must hold in reserve to encourage more lending, stepping up spending on railways and offering tax breaks for small firms.

It has said it will also encourage banks to lend more to exporters to boost shipments. Analysts said the measures have started to help boost growth and Beijing was likely to continue to take steps to help support the recovery further. China has set a growth target of 7.5% for 2014. Read more about the story here.