* Official PMI at 50.6 in December, matches Nov 7-mth high
* Follows HSBC PMI, which hit highest level since May 2011
* Surveys add to evidence economy was picking up in Q4
* Analysts concerned too much of the revival is investment
By Lucy Hornby
BEIJING, Jan 1 China's official manufacturing
purchasing managers' index held steady in December at 50.6,
matching November's seven-month high, as growth in new orders
was unchanged and the pace of output softened marginally.
With the main index above 50 for three straight months, the
survey indicates that China's vast factory sector is expanding.
The official PMI was released a day after a similar survey by
HSBC suggested manufacturing activity at its strongest since May
Together the surveys support a growing consensus that
economic activity in China revved up during October to December,
after GDP growth had slowed for seven consecutive quarters to
7.4 percent in the third quarter. That provides a welcome sign
for a global economy where both the euro area and Japan are in
recession and the United States is struggling for significant
"Output has stayed above the 50-mark, showing that the
manufacturing industry appears to maintain growth expectations,
but the rate of growth has weakened," the National Bureau of
Statistics, which released the data, said in a note.
The official PMI reading was slightly below expectations in
a poll of economists by Reuters last week that predicted a rise
in the PMI to 51.0.
The survey showed output in oil processing, quarrying and
tobacco industries slipped while food processing, auto
manufacturing, textiles, steel and electronics all expanded, the
A new export orders sub-index fell to 50 from 50.2 in
November. A PMI reading below 50 suggests growth slowed, while a
number above 50 indicates accelerating growth.
HSBC said its China PMI, which gathers more data from
smaller, privately held firms with a strong export focus, rose
in December to 51.5, its highest since May 2011.
The HSBC survey showed strong output despite a retreat in a
sub-index tracking new export orders. China's export sector, a
major source of growth for the economy, must combat slowing
demand in its biggest markets and rising wages and costs at
China's official PMI generally paints a rosier picture of
the factory sector than the HSBC PMI because it focuses on big,
state-owned firms. The HSBC PMI targets smaller, private firms.
There are also differing approaches to seasonal adjustment
between the two surveys.
Some analysts caution that the pick up in economic activity
in recent months may reflect renewed investment spending, rather
than the consumer activity that policymakers acknowledge is
needed to rebalance the economy.
"It's pretty clear that it's more driven by infrastructure
and increasingly housing, that's driving heavy industry," said
Zhang Zhiwei of Nomura International, speaking on Monday.
Rising land prices have prompted widespread expectations
that the real estate market will be revived by an
investment-driven recovery that would offset weak export
markets, even though the central government had pledged to
maintain investment and purchasing restrictions to try to
Railway spending delayed from earlier in 2012 was being
rushed out before the end of the year, and rising prices for
land purchased by state-owned developers could point to a
relaxation in property market curbs that has yet to be made
official, Zhang argued.
Steel futures recently hit a five-month high, after a dismal
year in which lacklustre demand contributed to overcapacity at
debt-ridden mills and traders.
China was expected to achieve economic growth of 7.7 percent
in 2012, forecasts in a benchmark Reuters poll show. That would
mark the slowest full-year expansion since 1999.
While that is way above the world's other major economies,
it is below the roughly 10 percent annual growth in China seen
for most of the last 30 years.
The government has relied on fine-tuning its policy settings
to try to combat the worst downturn China has faced since the
2008-2009 global financial crisis, studiously avoiding any hint
of repeating a 4 trillion yuan ($640 billion) stimulus package
it launched back then, which led to a debt-fuelled spending
binge by local governments.
Measures to boost growth included reducing bank reserve
levels and interest rates. More lately, they included injecting
liquidity into the financial system through money market
operations and accelerating approval of infrastructure projects.
The head of the influential Development Research Centre
called for appropriate base money growth in 2013, including more
cuts in banks' reserve requirement ratios (RRR), and a wider
floating range for the yuan to make it more flexible, in
comments published on Monday.
The central bank reiterated on Monday that China would stick
with a prudent monetary policy in 2013, the latest sign that
Beijing will not change policy direction when the new government
takes over this year.