During September, China's manufacturing activity continued to increase at a steady rate, on account of continuous improvement in domestic and overseas demand.

A minor fall to 55.0 in September, from 55.1 in August, was seen in the HSBC China Manufacturing PMI, or purchasing managers' index.

If the PMI reading is above 50, it means that the sector is increasing. On the other hand, a reading below 50 reflects an overall decline.

As per the bank's chief China economist Hongbin Qu, "Although the headline PMI remained broadly unchanged from the previous month, there was a marked expansion of manufacturing employment in September."

In September, manufacturers were recruiting at the fastest rate in 25 months, with the aim of keeping up with increasing sales volumes.

HSBC said in a research note, "Foreign order levels rose for a fourth straight month, but the increase in total new orders outpaced export sales, suggesting domestic demand was driving the overall improvement."

Due to enormous government spending in the middle of the global downturn, China's economy hiked by 7.9 percent in the second quarter of the year, up from 6.1 percent in the first quarter.

In an effort to prop up growth in the country by boosting investment in infrastructure and other government-backed projects, a four-trillion-yuan (585-billion-dollar) stimulus package was announced last year by Beijing.

In November, amid the worsening global financial crisis, the PMI dropped to a record low of 38.8. However, it improved continuously in the following months, going beyond the 50-mark in March.

"Manufacturing accounted for more than 40 percent of China's economic output last year, which has been hit hard by evaporating demand for its products in key export markets such as the United States and Europe," concluded HSBC.