Activity in China's manufacturing sector expanded at its fastest pace in more than two years in October in an indication that China’s economy is stabilizing.

The official Purchasing Managers’ Index came in at 51.2 in October. That was up from 50.4 in September and above the 50.0 mark that separates growth from contraction. October’s reading was stronger than expected and the highest since July 2014. Experts say the reading was largely bolstered by a rebound in domestic demand. 

Cai Jin, vice president of China Federation of logistics and purchasing, said, “We’ve seen a big rebound in new orders in October. The rise in new orders has exceeded the growth pace of production for the first time lately.”

New orders showed solid improvement to reach 52.8 in October from 50.9 in September. Factory output climbed as well but at a slower pace. The service PMI also climbed to its highest level this year in October.

Senior statistician of NBS’s service industry survey centre, Zhao Qinghe, said, “Under the push of the golden week holiday in October, industries such as railway transportation, airlines, and travel all stayed above the 55 mark. Business increased quite fast.”

New orders in the export sector contracted to below the 50 boom-bust line, suggesting persistent sluggishness in global demand. 

China’s economy grew steadily at 6.7 percent in the third quarter and seems on track to reach the government's full-year target of 6.5 to 7 percent growth.