The booming Chinese economy won't have to sweat much to meet its official target of 8% growth this year, and might surpass it.

A report published by brokerage CLSA on Monday showed that China's purchasing managers' index (PMI) hit a twelve-month high in July. Eric Fishwick, head of economic research for CLSA, said, "manufacturing activity continues to accelerate and, importantly, orders growth is being driven by the domestic economy. This is a positive as Chinese exports are now underperforming those of the north Asian NIEs supporting the panel's description of export demand as "lacklustre." Output and input prices rose for the first time in 11 months. CLSA Asia-Pacific Markets is Asia's leading independent brokerage and investment group.

More new production orders from local and overseas buyers helped China's manufacturing sector expand for the fifth straight month in July, according to the official survey released Saturday. China's purchasing managers' index increased to 53.3 in July, up from 53.2 in June, the China Federation of Logistics and Purchasing announced Saturday. The survey, conducted on the behalf of the National Bureau of Statistics, covers purchasing and supply managers in more than 700 firms across China.

The latest reports substantiated evidence that the Chinese manufacturing sector had bottomed out from its trough in November, when the PMI reached a record low of 38.8. China posted eight consecutive months of PMI growth since December, and July was the fifth straight month for the official PMI to register above 50, the watershed indicating an expansion of Chinese manufacturing activities.

Analysts with Goldman Sachs calculated the latest real PMI level at 55%, if taking into account of seasonally adjusted components such as input prices, quantity of purchases, and new export orders. Compared to periods between 2005 and 2008, China's July PMI readings were consistently lower than June's by 0.6%, 1.7%, 1.2%, and 3.6%, respectively.

Goldman Sachs said the seasonally-adjusted figures in July showed a meaningful acceleration of 1.7 percentage points from June, and was much higher than the level of 54% in the first half of 2008, as well as better than the average level of 54.6% between 2005 and 2007 when China's GDP growth was firm at around 10%.

"Notably, a clear upward trend in new export orders has emerged," said Goldman Sachs in a research report. "We expect July real activity data, especially industrial production data, to trend up further when they are released during the week starting August 10," the brokerage predicted.

Jing Ulrich, Managing Director & Chairman of China Equities with J.P. Morgan, attributed the surge in China's PMI to a series of supportive measures implemented since the end of last year.

"Continued policy support for key sectors such as automobiles and property should lead to increased industrial demand. China's vehicle sales were up 36.48% in June from previous year (v.s. 17.7% yearly growth in the first half), due in part to the cut in small vehicle purchase taxes and the recently implemented 5 billion yuan ($731.5 million) scrap vehicle replacement subsidy program. Housing sales were up 130% on a yearly basis in June (compared with the 81% yearly growth in the first half)." Ulrich observed.

In spite of the recovery in manufacturing, Ulrich warned that uncertainties still remain in China. The Ministry of Industry and Information Technology recently blamed "blind investments" for the excess production capacity in the cement, iron and and shipbuilding industries. In addition, there has been speculation that the government may begin to take tightening action, even though the central bank lately reaffirmed that its top priority is to support economic growth.

Meanwhile, Morgan Stanley upgraded its 2009 headline GDP growth estimate to 9%, citing the bright prospective of investment growth fueled by aggressive policy stimulus together with resilient consumption and a bottoming-out of exports in the remainder of 2009. China reported late last month that its economy rose 7.9% in the second quarter, up from 6.1% in the first quarter.