China’s manufacturing activity in March rebounded to its highest level since August, which has been seen as a sign that the government’s fiscal and monetary stimulus is kicking in, as well as the impact of reforms.

China’s manufacturing purchasing managers’ index (PMI) rose to 50.2 in March, up from February’s 49, according to the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing. The reading beat a median estimate of 49.4 in a Bloomberg survey.

The non-manufacturing PMI rose to 53.8 from 52.7 in February, while

commodity currencies and copper rose. A reading above 50 indicates expansion, while a reading below 50 reflects contraction. It was the highest reading in nine months and the first expansion since June 2015.

National Bureau of Statistics analyst Zhao Qinghe said the March PMI showed "some positive signs have started to emerge".

“Manufacturing production and the market warmed up as companies started working after the Spring Festival and supply-side reform accelerated,” Zhao said.

The price rebound of major international commodities spurred purchases. Technology upgrades also contributed to improvement of manufacturing sectors, said Zhao.

China`s economy, the world’s second largest, grew 6.9 per cent last year, its slowest rate in a quarter of a century. The news came on the day after Standard & Poor’s, the ratings agency, cut its outlook on China’s government credit to ‘negative’ from ‘stable’ as it believed rebalancing of the Chinese economy would take place more slowly than expected.

A similar PMI by Caixin and Markit, which focuses on smaller firms, showed manufacturing activity shrank again in March, though at the slowest pace in 13 months.

(Additional reporting Bloomberg)