While July's data suggested that the Chinese economy could be bottoming out, the strong rise in the flash HSBC Purchasing Managers' Index, released on Thursday, testifies that it is recovering.

The preliminary HSBC reading for August hit a four-month high of 50.1, up from a final reading of 47.7 in July. The final HSBC PMI reading had been below 50, signaling contraction, for three consecutive months, in stark contrast with the above-50 official PMI reading. The fact that both indexes are now above 50 agrees with other signs that the economy is shaking off its earlier sluggishness.

Seen from indicators released in the past weeks, such as the better-than-expected industrial production, stable retail sales and recovering trade data for July, the Chinese economy has shown some signs of stabilization. The rising flash HSBC reading further reinforces that trend.