China's manufacturing sector ended a three-month decline in August with the Purchasing Managers' Index rising to 50.1 from an 11-month low of 47.7 in July, according to HSBC Holdings on Monday.

It implies that the manufacturing industry has started to stabilize on the back of a modest rebound of new orders and output, the bank said.

Qu Hongbin, chief economist for China at HSBC said that it was mainly driven by the "initial filtering through of recent stimulus measures and companies' restocking activities".

"We expect some upside surprises to China's growth in the coming months," he said.

A report from HSBC on Monday predicted a modest uptrend in production to continue in August, with industrial production growth accelerating to as fast as 10 percent year-on-year. It was up 9.7 percent in July.

However, the HSBC's figure still indicated weakness in new export orders, which means that the growth will continue to depend on the ongoing turnaround in domestic demand, it said.

On Sunday, the National Bureau of Statistics and China Federation of Logistics and Purchasing released the official August PMI – a 16-month high of 51 up from 50.3 in July.