The Purchasing Managers' Index (PMI), a barometer of manufacturing activities, reached 51.7 percent in August, up 0.5 percentage points from July, said the China Federation of Logistics and Purchasing.

The PMI includes a package of indices to measure manufacturing sector performance. A reading above 50 percent indicates economic expansion. August's figure marked the end of a three-month decline, although it was the 18th straight month that the index was above 50 percent.

"The bounce-back bodes well for the outlook of the broader economy," said Zhang Liqun, a senior researcher with the Development Research Center of the State Council.

The only cause for concern is a surge in the price of raw materials, which mounts cost pressures on enterprises, he said.