But the subindex for small manufacturing companies fell to 49.4 in October from 50.1 in September, indicating business activity among these firms contracted in the latest month, while the index for large industrial enterprises rose 0.1 point to 52.6, indicating continued strong expansion.

A PMI reading above 50 means that activity in the sector is expanding, a level below 50 that it is contracting. The further the reading is above or below 50, the faster the expansion or contraction.

The official non-manufacturing PMI, which measures sentiment in the services and construction sectors, stood at 56.2 in October. This was above the reading of 55.9 in September and also above the median expectation in a Bloomberg survey for a rise to 56.0.

Within non-manufacturing, service sector sentiment rose to 55.5 from 55.2, while morale within the construction sector eased back to 59. 8 from 60.2, but remained very strong as the nation’s infrastructure and property building booms continued.

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What is the purchasing managers' index (PMI)?

What is the purchasing managers' index (PMI)?

The official manufacturing and non-manufacturing indices have showed an expansion in economic activity for eight consecutive months.

The official composite PMI, which combines the manufacturing and non-manufacturing indexes, rose to 55.3 in October from 55.1 in September.

China is expected to be the only Group of 20 country to record positive growth this year, with the International Monetary Fund projected growth of 1.9 per cent this year, following by a further acceleration to 8.2 per cent in 2021.

“Manufacturing production continued to pick up, with demand steadily improving,” Zhao Qinghe, a senior statistician at the NBS, said in a statement. “In terms of industrial sectors, the recovery of some traditional manufacturing industries has accelerated.”

The subindex for manufacturing production dropped slightly to 53.9 in October from 54.0 in September, while the subindex for total new orders remain unchanged at 52.8 in October. However, both remained well above the 50 break-even threshold indicating further strong expansion in both output and demand.

Sentiment on new export orders rose further to 51.0 in October after returning to expansionary territory in September for the first time since December with a reading of 50.8. The imports subindex also rose, to 50.8 in October from 50.4 in September

But the subindex for employment in the manufacturing sector remained below 50.0, indicating industrial firms continued to shed jobs, with the index falling to 49.3 in October from 49.6 in September.

The major divergence between activity in large and small industrial firms may explain the continued drop in manufacturing employment, the NBS indicated.

“[Within the manufacturing PMI], the subindex of small companies’ new orders fell and was significantly lower than the overall level of the manufacturing sector, showing that market demand for small business was particularly insufficient. In addition, some surveyed firms said that they were facing longer waits for imported raw materials and heavier transport costs, due to the new wave of coronavirus pandemic abroad,” Zhao said.

Smaller, private sector firms account for most jobs in the economy.

Private analysts also wondered what the impact of falling manufacturing jobs would mean for the pace of the recovery ahead.

“The demand side [of the economy] continued to improve this month, but employment conditions of companies fell slightly, which might indicate that the improvement in the business outlook expectation has slowed down,” cautioned Liang Zhonghua, chief macro analyst at the research institute of Zhongtai Securities, in a note on Saturday.

Still, the main drivers of the recovery so far – exports combined with strong infrastructure and property construction – would continue to support the economy in coming months, Liang said.

“With overseas coronavirus outbreaks mounting again, China’s advantage in exports will continue, and exports will remain strong in the short term,” while the acceleration of infrastructure projects will ensure that activity in the construction sector will remain high, he said.

The continued rise in service sector sentiment is also a good sign for the overall economy, NBS statistician Zhou said.

“The recovery of the non-manufacturing sector accelerated … the momentum in the service sector remained steady and upwards. Driven by the National Day and Mid-Autumn Festival [holiday period from October 1 to October 8], consumers were more willing to travel and consume,” he said.

Other recent Chinese economic indicators have also shown the improvement in economic conditions in the world’s second largest economy.

On Tuesday, the National Bureau of Statistics confirmed profits of China’s large industrial firms increased 10.1 per cent in September compared with a year earlier, though this was lower than the increase of 19.1 per cent in August.