HSBC China Manufacturing PMI reaches 19-month high

December's HSBC China final manufacturing PMI rose to a 19-month high of 51.5, thanks to stronger new business in-take and expansion of production, according to figures released by HSBC Monday.

The statistics suggest that China's economy remains on track for recovery as it enters 2013, said the HSBC report. Despite persistent external headwinds, as indicated by still contracting new export orders, the financial organization expects China's GDP to rebound to 8.6 percent in 2013, underpinned by China's continued policy support.

December's final headline PMI rose 1 point to 51.5, the fourth consecutive month of relative improvement in China's HSBC PMI, and the second above-50 level reading, since October 2011.

According to the report, this improvement was mainly driven by an expansion of production, on the back of a strong increase in new business inflows. The figure also confirmed that China's manufacturing sector is gaining momentum.

However, the external environment remains challenging in the coming 2013. This is reflected not only by the drop in the new export orders readings, but also by fast fading hopes of an effective resolution to the U.S.'s fiscal cliff crisis. Moreover, European economic fundamentals remain weak, the report analyzed.

Going forward, HSBC expects China to keep its pro-growth fiscal and monetary policy stance in place, and pursues an appropriate pace of growth in total social financing as well as tax cuts. Growth in infrastructure investment is expected to maintain strong momentum as there are still plenty key construction projects in the pipeline.