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Last updated: February 1, 2013 11:16 am
The Chinese economy started 2013 on a solid footing, according to surveys that showed moderate growth in its manufacturing sector last month.
The official purchasing managers’ index, a gauge of the industrial sector, came in above the midpoint of 50 for a fourth straight month, signalling a sustained expansion in activity. Although the PMI edged down to 50.4 in January from 50.6 in December – an indication of slightly slower growth – analysts said China remained on course for a mild recovery after a sluggish 2012.
A separate PMI for China published by HSBC reinforced that view, rising to a two-year high of 52.3 in January from 51.5 in December. The official PMI is generally seen as reflective of state-owned companies, while the HSBC version is a better proxy for the private sector.
Analysts said Chinese growth was set to accelerate in the first half of 2013 after slowing to 7.8 per cent growth in 2012, its weakest year in more than a decade.
“In general we think the rebound is on track but the rebound seems to be quite modest,” said Ding Shuang, an economist with Citi.
China’s property market is also beginning to heat up. Home prices rose 1 per cent in January, the biggest increase in two years, SouFun, a top real estate website, said on Friday, based on its survey of 100 cities.
Investors were buoyed by the signs of vigour in the Chinese economy. The Shanghai Composite, China’s main stock index, climbed 1.4 per cent, building on its 20 per cent rally over the past two months.
The official PMI index for new orders increased to 51.6 in January from 51.2 in December, but the category for exports dropped to 48.5 from 50. That divergence indicates that external demand is sluggish, and that domestic demand is the main driver of growth.
Analysts cautioned against reading too much into the PMI numbers because economic data in China is always heavily distorted at the start of the year. With the country set to celebrate its lunar new year festival in early February, companies have already started scaling back production and tens of millions of workers have begun their annual mass migration from their factories and city jobs back to their rural homes.
“The PMI is a quite inaccurate barometer around the Chinese New Year holiday,” said Lu Ting, an economist with Bank of America Merrill Lynch. “We believe the Chinese economy and its related asset markets will remain in a sweet spot in the near term.”
Additional reporting by Emma Dong
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