China's manufacturing sector remained in expansion territory in August, fuelled by the strongest increase in new business for just over three years. Firmer foreign demand was a key driver of new order growth, with export sales rising to the greatest extent in over seven years in August.

As a result, companies expanded their production schedules and buying activity, while business confidence rose to its highest for five months. However, stricter environmental policies were a key factor leading to longer delivery times, whilst inflationary pressures intensified as input costs and output charges both rose at faster rates.

The seasonally adjusted Purchasing Managers' Index (PMI) - a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy - registered 51.6 in August, up from 51.1 in July to signal an improvement in overall operating conditions. The health of China's manufacturing sector has now strengthened in each of the past three months, with the latest upturn the strongest since February.