Manufacturing activities at 7-month high in Oct.

Stainless wires are moved into the warehouse at a specialty steel plant in Dalian, Liaoning province. China is moving to cut excess industrial capacity, especially in the iron and steel, electrolytic aluminum, cement and shipbuilding sectors. [China Daily]

China's manufacturing activities expanded at its fastest speed in seven months in October amid a broad round of economic recovery in the world's second largest economy.

According to HSBC's preliminary reading, the China Manufacturing Purchasing Managers' Index (PMI) rose to 50.9 in October from September's final index of 50.2.

Stronger domestic demand supported a rise in the output sub-index to 51 - a six-month high -compared with a reading of 50.2 for the sub-index in September, HSBC's flash PMI data showed.

New orders and export orders also are stronger.

A reading above 50 means expansion in the manufacturing sector.

China's economic growth accelerated to 7.8 percent in the third quarter, up from an increase of 7.5 percent in previous quarter. Q3's GDP growth marked the second increase in the past ten quarters.

Qu Hongbin, chief China economist at HSBC, said the better-than-expected PMI preliminary reading indicates that China's growth recovery is consolidating in the fourth quarter.

"This momentum is likely to continue in the coming months, creating favorable conditions for speeding up structural reforms," Qu said.

Analysts anticipate that the Third Plenary Session of the Central Committee of the Communist Party of China, which will be held in November, will focus on more comprehensive reforms within the current favorable economic conditions.

The upcoming meeting will be a milestone for the country's development, as economic policies for the next decade are expected to lay out a more open and dynamic system, analysts said.

"In the next three to six months, financial reform may make further progress to illustrate the determination for structural reform by the new leaders, and likely policy actions include approval of privately owned banks and the introduction of a deposit insurance system," said Zhu Haibin, chief China economist at JPMorgan Chase & Co.

Zhu also said that measures to address major structural problems, such as overcapacity, investment inefficiency and financial imbalances, need to be strengthened and implemented after the meeting.