The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) rose to 52.0 in May.
This was the highest level since December and inching up from April's 51.9.
Reuters reports that ''China's factory activity expanded at the fastest pace this year in May as domestic and export demand picked up, though sharp rises in raw material prices and strains in supply chains crimped some companies' production, a business survey showed on Tuesday.''
Analysts polled by Reuters had expected the index to remain at 51.9.
''New orders rose at the strongest pace so far this year and a gauge for export orders was the highest since November, but the output reading, while still solid, was slightly lower than the previous month,'' Reuters reported.
"Rapidly rising commodity prices began to disrupt the economy as some enterprises began to hoard goods, while some others suffered raw material shortages. Supply chains were also significantly affected," Wang Zhe, senior economist at Caixin Insight Group, said in comments released alongside the survey's findings.
AUD/USD update
AUD/USD is bid on the day but hardly change don the data.
Traders are more focused on today's Reserve Bank of Australia meeting, although there are no expectations of any changes.
Importantly, the price has breached a key daily resistance structure that will now be expected to act as support.
About Caixin China Manufacturing PMI
The Caixin China Manufacturing PMI™, released by Markit Economics, is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private manufacturing sector companies.
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