Growth in China's giant factory sector accelerated to a two-year high in January, a preliminary private survey showed, as manufacturers received more local and foreign orders in an encouraging sign for the country's economic rebound.
The HSBC flash purchasing managers' index (PMI) rose to 51.9 in January, the highest since January 2011 and above the 50-point level that shows accelerating growth in the sector from the previous month.
The PMI, the earliest preview of China's economic health in 2013, is the latest indication that the world's second-largest economy is steadily recovering from a near two-year cool-down.
"Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China's ongoing recovery in the coming months," Qu Hongbin, chief China economist at HSBC, said on Thursday.
Asian investors welcomed the data.
The MSCI's broadest index of Asia-Pacific shares outside Japan defied nervousness over Apple Inc's disappointing earnings to edge up 0.1 percent, while the Australian dollar steadied from an earlier slip.
HSBC said the sub-indices for output, new orders and employment that account for three quarters of the flash PMI all improved in January to hover above 50.
The output index climbed to 22-month highs while the employment sub-index was at its highest since May 2011.
Demand for Chinese exports also improved slightly this month, the flash index showed, but it shed little light on whether the pick-up would last.
China's exports had a surprisingly strong spurt in December, contributing to the country's emergence from a protracted cool-down, though analysts worry the rebound would be short-lived on soft U.S. and European demand.
On the other hand, analysts said the gentle up-swing in domestic activity appears to be sustainable and should drive China's economic recovery.
"The consumer is coming back," said Tim Condon, an ING economist in Singapore.
Chinese shoppers have spent more in recent months after the country's successful leadership change last year and a stabilising euro zone raised confidence, he said.
"Manufacturers are seeing the pick-up in spending growth as a reason to expand production," Condon said.
General Motors Co said last week it will add 400 dealers in China this year as it looks to keep growing faster than China's overall automotive industry which is expected to expand by 8 percent this year.
EXPORT ORDERS RECOVER
The new export orders sub-index rose to 50.1 in January, up from December's 49.2 that pointed to waning demand.
The sub-index was persistently weak in the past year, rising above the