China's lower manufacturing reading masks 'notable rebound'

China's closely watched Purchasing Managers' Index – a measure of manufacturing activity – fell to 50.1 in July from 50.2 in June, a survey by the National Bureau of Statistics showed on Wednesday.

CNBC reports "after adjusting for seasonality, the reading shows that the manufacturing sector is actually improving, thanks to the slew of stimulus measures implemented by the Chinese government:"

Helen Qiao, Chief Economist for Greater China with Morgan Stanley, said the July reading usually declines by about 0.8 percentage points from June on average every year.

“If it does come out around this level, we would say that after seasonal adjustment, actually this number implies a pretty notable rebound in terms of growth momentum,” Qiao told CNBC Asia’s “Squawk Box” on Wednesday before the release of the number.

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Dariusz Kowalczyk, Senior Economist and Strategist for Asia ex. Japan with Credit Agricole, said the reading is consistent with positive growth momentum of industrial output and much better than during the Lehman crisis, when the PMI plunged to the high 30s.

China – which overtook Japan in 2010 to become the world's second largest economy – dominates the global trade in just about every commodity including iron ore (representing some 60% of the global 1 billion tonnes seaborne trade), copper (38%), coal (47%), nickel (36%), lead (44%) and zinc (41%).

While manufacturing may be experiencing  a rebound the increased activity has not shown up in trade and shipping numbers out of China.

Shipbuilding and shipping capacity in China surged as the country's demand for raw materials escalated in tandem with breakneck economic growth and investment in infrastructure, but not all the indicators have shown sharp reversals.

Read: Not convinced Chinese trade is a disaster? Take a look at these shipping numbers >>