By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) -- China's manufacturing activity likely accelerated in June, adding to a picture of an improving economy, according to analysts' forecasts for data due Wednesday.

"We believe the recovery of manufacturing is picking up pace from May to June," wrote Merrill Lynch economist Ting Lu in a research note Monday.

Merrill Lynch forecasts the Purchasing Manager's Index will rise to 54.5 in June from May's 53.1, while industrial production growth will quicken to 9.5% from 8.9% in May. A reading above 50 indicates expansion.

Lu said daily electricity consumption, which climbed 3.8% on year over a 10-day period in the middle of June, is the best indicator of the rebound in factory activity. The turnaround reversed weakness in the preceding 20-day period.

Merrill Lynch also raised its estimate for China's economic growth in the second quarter to 7.6% from its earlier forecast of 7.2%. Consensus estimates are around 6.5% to 7%.

People's Bank of China Gov. Zhou Xiaochuan said Monday the mainland Chinese economy accelerated in the second quarter and the trend should continue in upcoming quarters, enabling the economy to meet the central government's target of 8% growth this year.

The Chinese economy expanded 6.1% in the first quarter, its weakest pace in a decade.

"If there is no major turbulence internationally, the economy should recover in the third and fourth quarters. Under this situation, [the economy] could reach its set target of 8% growth," Zhou was cited as saying in news reports during a visit to Hong Kong Monday.

Chinese manufacturing activity expanded in May, marking the third consecutive month of gains. The strength of the data confounded some analysts who had expected softer, yet positive data, reflecting the effects of the seasonal slowdown in factory output and the effects of relatively soft retail sales figures in China.

Merrill Lynch also said it expects China to hold its currently loose monetary policy for the remainder of the year.

A day ahead of the PMI data release, China's benchmark Shanghai Composite Index inched 0.04% higher. The move lagged larger gains elsewhere in Asia, with Hong Kong's Hang Seng Index adding 1.7%, and Singapore and Taiwanese indexes each up 1.4%.

Still, the Shanghai index has enjoyed a strong rally in recent trading, hitting a 13-month high in Monday's session.

In other regional action, Tokyo's Nikkei 225 Average was up 1.9%, South Korea's Kospi added 0.8%, and Australia's S&P/ASX 200 rose 1.6%.

Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.