The purchasing managers index (PMI), a barometer of manufacturing activities, stood at 50.9 percent in August, reversing four consecutive months of declines, said the China Federation of Logistics and Purchasing (CFLP). The index came in at a 29-month low of 50.7 percent in July.

Still, this was the 30th straight month in which the index was above the boom-andbust line of 50 percent. A reading above 50 percent indicates economic expansion.

The new orders sub-index, an effective gauge of domestic demand, stood at 51.1 percent in August, the same as last month. The input prices sub-index, a measure of how much factories pay for raw materials and other intermediary goods, climbed to 57.2 percent, compared with 56.3 percent in July.

"It shows that the broader economy is recovering its lost ground," said Zhang Liqun, a researcher with the Development Research Center of the State Council. "But uncertaintiesn are still hanging over the growth outlook, especially slack in exports and consumption."

"The biggest concern is severe inflation, which is mounting pressures on enterprises," he said. "As a result, it is still necessary to take measures to underpin foundation of the manufacturing recovery."