Dec. indicates positive start for China's 2013 economy

China's manufacturing sector remained flat while the non-manufacturing sector continued to improve in December, indicating signs of modest recovery in the world's second largest economy, analysts said.

China Federation of Logistics and Purchasing (CFLP) announced Tuesday the Purchasing Managers' Index (PMI) for the manufacturing sector remained at 50.6 percent in December. It was the third consecutive month when the figure was above 50 percent.

Data has shown improvement in enterprises' operations, as the PMI figure for large firms stayed above 50 percent for four straight months. Small and micro-enterprises rose 2 percentage points to 48.1 percent, according to the CFLP.

In addition, the PMI of the non-manufacturing sector was 56.1 percent, up 0.5 percentage points from November, showing a uptrend of three consecutive months.

A PMI reading above 50 percent indicates expansion from the previous month, while a reading below 50 percent indicates contraction.

In terms of industries, the service and infrastructure industries played a bigger role in shoring up growth, according to the CFLP.

The service industry turned into a main dynamic of the non-manufacturing sector as the PMI and new order sub-index continued to run at high levels,

Cai Jin, CFLP vice chairman, thought that the continued expansion suggested a moderate economic recovery trend and a positive start for the new year's economy.

However, what is notable is the data of official PMI and HSBC China final manufacturing PMI both showing that new export orders continued to contract in December.

Zhang Liqun, an analyst with the Development Research Center of the State Council, a government think tank, said the trend of economic rebound was still weak as the December PMI data stayed at the same level as the previous month.

Judging from the decline in the sub-index of new export order, Zhang said the export condition was still "not good."

But considering an upward trend in domestic consumption and investment, market demand will remain stable, he added.

The external environment will remain challenging in 2013. This is reflected not only by the drop in the new export orders readings, but also by weak economic fundamentals of U.S. and Europe countries, the HSBC report analyzed.

China's foreign trade is expected to increase by around 6 percent year on year in 2012, slower than the annual target of 10 percent set by the government earlier the year, Commerce Minister Chen Deming told the annual meeting of the ministry.

The Ministry of Commerce set a growth target of 8 percent for 2013, Chen said.

2013 GDP GROWTH MAY EXCEED 8

With economic data improving in recent months, many economists have projected a GDP growth in China in 2013.

Lu Zhongyuan, deputy director of the Development Research Center under the State Council, or China's Cabinet, said there is no doubt China's economy will grow by more than 8 percent in 2013 and the government should focus more on promoting sustainable growth and containing imported inflation.

China's economy has bottomed out since June of last year, buoyed by the country's economic restructuring, innovation incentive and the market's self-stabilizing forces, Lu said, adding these momentum will continue to drive up growth in the year ahead.

The country's GDP might grow by 8.6 percent in 2013, due to new impetus in infrastructure construction, a rebound in the property market and increased consumption, forecast Hongbin Qu, chief economist for HSBC China.

Meanwhile, HSBC also expected China to keep its pro-growth fiscal and monetary policy stance in place, and pursue an appropriate pace of growth in total social financing as well as tax cuts.

Chinese authorities vowed to maintain a proactive fiscal policy and prudent monetary policy in 2013.

"Enhancing quality and efficiency of economic growth" was set as a "central task" in 2013, according to the statement issued after the annual central economic work conference last year.

China may fine-tune its monetary policy in 2013 by reducing interest rates and the reserve requirement ratio (RRR) to support economic growth, according to research results by the China Development Bank, the State Information Center and the Shanghai Securities News.