December boost for manufacturers

China's manufacturing business recovery maintained a steady pace in December, further consolidating a solid base for the economic recovery.

The manufacturing Purchasing Manager's Index in December remained at 50.6, unchanged from November's reading and indicating that expansion momentum has stabilized.

This is according to the National Bureau of Statistics and China Federation of Logistics and Purchasing, which jointly released the data on Tuesday.

It is the third consecutive month the PMI reading registered more than 50, the point separating expansion from contraction in manufacturing operational activities. The achievement is due to a moderate rebound in domestic demand, and steady growth in industrial production.

The December manufacturing PMI based on a survey from HSBC Holdings Ltd rose to a 19-month high of 51.5 from November's 50.8, the fourth straight monthly rise and the second above-50 reading since October 2011, according to data the bank released on Sunday.

"It confirmed that China's manufacturing sector is gaining momentum, as domestic demand continues to strengthen thanks to the filtering through of Beijing's continuous pro-growth policy efforts," said Ma Xiaoping, an economist in China with HSBC.

The still-challenging external environment, including weak European economic fundamentals, calls for sustained policy support on both the fiscal and monetary fronts, Ma said.

"This is something Beijing's top leadership has already committed to into 2013, which will support 2013 GDP growth to rebound to 8.6 percent."

Lian Ping, chief economist with the Bank of Communications, said that as short-term domestic market confidence has almost recovered and investment is picking up, industrial enterprises will start to increase inventory in 2013. He expects industrial production growth to stabilize this year.

The Bank of Communications forecast that industrial output for 2012 will increase 10 percent from a year earlier, and will rise to 11 percent in 2013.

The improving economic indicators encouraged Chinese investors at the end of 2012, with the Shanghai Composite Index rallying 1.61 percent on the last trading day of 2012 to 2,269.13 points.

Zhang Liqun, an analyst with the Development Research Center of the State Council, said on Tuesday that more advantages will emerge in 2013 to support growth and to improve the economic environment.

However, the modest rebound in the PMI and weak growth in new orders show that recovery in the manufacturing sector may suffer setbacks along the way, Zhang said.

"It still needs more measures to expand domestic demand to consolidate the improving economic situation."