Index adds to rebound hopes

Rising domestic demand, exports drive up gauges of economic activity for Dec

The growth of China's non-manufacturing industries continued to pick up in December, adding to signs of an economic rebound in the country.

The December non-manufacturing Purchasing Managers' Index rose to a four-month high of 56.1 from November's 55.6, a result of increasing domestic market demand and exports, according to data released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing on Thursday.

It has increased for three consecutive months after it hit a 10-month low in September of 53.7.

A reading above 50 indicates an expansion of business activities.

The manufacturing PMI in December was 50.6 - the same as that in November. HSBC Holdings Plc also released its manufacturing PMI figure of 51.5, the highest in 19 months.

"Domestic demand is becoming the key foundation for keeping up economic growth," said Cai Jin, vice-chairman of the federation.

Cai said the service and construction industries are important to sustaining growth in the long term.

Flagging exports and government measures to contain inflation dragged down the economy's growth to 7.4 percent in the third quarter, the slowest pace in more than three years.

A sub-index of the non-manufacturing PMI showed that new orders climbed to 54.3 in December from 53.2 in November - the highest level in 2012. New export orders rose to 52.5, staying above the expansion-contraction line of 50 for two straight months.

New orders in the construction industry increased to 57.5 by the end of 2012, indicating that investment in infrastructure construction will continue to increase in the coming months, Cai said.

Business in the construction industry expanded more rapidly in December, having a reading of 61.9, 0.6 percentage points higher than a month earlier, the NBS said.

For the service industry, the index increased to 54.7 in December compared with 54.2 in November, and it remained higher than 54 for the fourth quarter last year, "meaning that the service industry has been a stabilizer of the whole economy", Cai said.

Wang Tao, the chief China economist with UBS AG, said: "The latest manufacturing PMI shows that the economic recovery has continued, albeit at a modest pace."

She said fixed-asset investment and property activities might have stayed strong in the last three months of 2012 thanks to the easy credit conditions.

"The real GDP growth in the fourth quarter may rebound to 7.5 percent year-on-year," Wang said.

The NBS is scheduled to release the final economic indicators for the last quarter and entire year of 2012 on Jan 18.

"The economic rebound momentum is likely to be sustained in the coming months when infrastructure construction starts running at full speed and property market conditions stabilize," said Qu Hongbin, the HSBC chief economist in China.

"This, plus Beijing's reiteration of keeping a pro-growth policy in place, should support a modest growth recovery of around 8.6 percent year-on-year in 2013, despite the ongoing external headwinds," he said.

chenjia1@chinadaily.com.cn

(China Daily 01/04/2013 page13)