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.
The International Monetary Fund (IMF) maintained on Wednesday its projection for China's economy to grow 8.2 per cent this year after a 7.8 per cent gain in 2012. But the IMF predicted the euro-zone's economy would contract slightly and United States gross domestic product would grow just 2 per cent.
The employment sub-index in the flash PMI report rose to 51.2 in January from 50.1 last month.
A gauge of input prices jumped to 54.6 from 52.6 a month earlier, suggesting "manufacturers have stepped up purchases of raw materials due to confidence about the market outlook," said HSBC economist Sun Junwei. Output prices also rose, albeit at a slower pace.
Goldman Sachs said the flash PMI data suggests negative impacts caused by snowstorms and heavy pollution were limited.
The US bank believes strong manufacturing growth is likely to be supported by favourable domestic liquidity conditions.
The mainland's four biggest commercial banks extended new loans worth a total of 270 billion yuan (HK$337 billion) in the first two weeks of this month, almost double the amount in the same period last year and more than the new loans issued in the whole of December, the China Securities Journal reported this week.
Despite the favourable PMI data, the Shanghai stock market was volatile yesterday, falling 0.8 per cent to close at 2,302.6 points, amid news that North Korea was planning a nuclear weapon test and rumours that the mainland might resume initial public offerings of shares.