China's manufacturing sector powers ahead

02-02-2010

China's manufacturing sector steamed ahead in December as strong rises in new orders and output drove a key economic survey to a 20-month high.

The official purchasing managers' index (PMI) jumped to 56.6 in December from 55.2 in the previous month, according to the China Federation of Logistics and Purchasing (CFLP).

It was the tenth straight month the index has stood above the watershed mark of 50, indicating an expansion of activity.

As the biggest month-on-month rise since March, it also suggested that the Chinese manufacturing sector, far from plateauing after its recovery, has actually gathered momentum.

"December's PMI reading suggests sustained expansion in industrial activity," JP Morgan China equities chairman Jing Ulrich said in a research note.

"The forward-looking components of PMI indicate continued expansion in both domestic and external demand."

Worries about price rises have emerged again in China after deflation for much of 2009, with top leaders saying that controlling inflationary expectations will be one of their priorities this year.

China's PMI also showed that the country's job market has continued to improve. The employment sub-index hit 52.2 in December, up from 51.1 in the previous month, as 12 of 20 industries reported increases in hiring.

"We expect China's strong economic growth momentum to continue in 2010, with the major source of growth coming from a broad-based improvement in private consumption, and further strengthening in private housing investment, and a solid recovery in exports," Mr Ulrich said.

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