China factory output rises to 2-year high

Mainland manufacturing activity grew this month at the fastest pace in two years, a private survey has indicated.

The expansion, boosted by robust demand despite cold weather, shows a good start for the economy in the new year, analysts said. Recent reports about looser credit also added to confidence about a recovery.

The HSBC flash purchasing managers' index (PMI) for China rose for a fifth month to 51.9 in January, from a final reading of 51.5 last month, according to preliminary survey results issued by HSBC and Markit yesterday.

The new orders sub-index fell slightly to 52.7 from 52.9 last month, but remained above the threshold of 50, indicating an expansion. New export orders reversed a contraction, rising to 50.1 from 49.2. The final report is due on February 1.

"Thanks to the continuous gains in new business, manufacturers accelerated production by additional hiring and more purchases," said Qu Hongbin, chief China economist at HSBC.

"Despite still tepid external demand, the domestic-driven restocking process is likely to add steam to China's ongoing recovery in coming months," he said.