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China manufacturing activity rises

BEIJING: Activity in China's vast manufacturing sector hit its fastest pace in December since May 2011, a survey of private factory managers showed, with a sub-index for new orders pointing to continued strength in the new year.

The final reading for the HSBC Purchasing Managers' Index (PMI) rose to 51.5 in December, well above the preliminary reading of 50.9 published in the middle of the month and November's final reading of 50.5.

A complementary December survey by China's National Bureau of Statistics, due to be published today, is expected to show similar signs of manufacturing strength. Economists expect the official PMI to show a rise to 51 from 50.6 in November, expanding at its fastest pace in eight months.

The HSBC PMI rose above 50, the line that demarcates accelerating from slowing growth, in November for the first time in more than a year.

The survey results fit with a growing consensus that the Chinese economy revved up in the fourth quarter, after growth slowed for the seventh consecutive quarter to 7.4 per cent in the third. A sub-index tracking new orders showed even more room for optimism, rising to 52.9, its highest level since January 2011.

In another sign of factory-sector growth, a sub-index tracking output rose to its highest level since May 2011.

The improving economic picture seems primarily linked to domestic demand, as China's export sector continues to grapple with a slowdown in its biggest markets. A new export orders sub-index retreated below 50 in December, after rising into expansionary territory in November for the first time in seven months.

China is on course to achieve growth of 7.7pc in 2012, according to forecasts in a benchmark poll, the slowest full year of expansion since 1999.

While that is way above the world's other major economies, it is below the roughly 10pc annual growth seen for most of the last 30 years.

Manufacturing activity could be buoyed by brisk consumption in the final month of the year and the end of a destocking cycle, Merchants Securities analyst Xie Yaxuan said.



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