December's better-than-expected manufacturing activity data indicates that the Chinese economy may continue to stabilize, at least for the start of 2020, and more pro-growth policy measures are on the horizon to sustain the recovery, analysts said.

The headline purchasing managers index of the manufacturing sector, a gauge of manufacturing activity growth in China, came in at 50.2 last month, unchanged from November, the National Bureau of Statistics said on Tuesday.

A figure above 50 indicates manufacturing growth and below 50 contraction.

This is the second consecutive month the index has remained above the boom-or-bust line.

"As traditional holidays (Spring Festival) approached, supply and demand in the manufacturing sector were both brisk," said Zhao Qinghe, a senior NBS statistician, adding that export orders increased considerably last month.

The sub-gauge for new export orders recovered last month, moving into the expansionary range for the first time in the past year and a half, while the production sub-index rose to 53.2 from 52.6 in November, supported by active production in such areas as the food and beverage, clothing, pharmaceutical and automobile industries, Zhao said in a note.

External demand improved on the back of the phase one trade deal text agreement with the United States and the bottoming-out of global manufacturing activities over the last quarter, said Zhang Deli, chief macroeconomic analyst at Yuekai Securities.

"This, in tandem with an expectation of stronger countercyclical policy measures coming, has motivated manufacturers, who have a low level of inventory on hand, to quicken production and get prepared for a potential recovery of demand," Zhang said.

Improvements in economic conditions may continue in the first half of 2020, he said. Zhang added that GDP growth is expected to stand at 6 percent year-on-year in the fourth quarter, as it did in the third quarter, while full-year growth for 2019 may land at 6.13 percent.

Iris Pang, an economist at ING, a Dutch global financial institution, said both the commercialization of 5G and infrastructure investment will help sustain the recovery of China's manufacturing sector this year.

The commercialization of 5G may successively drive factory activity in 5G receptors, 5G smartphones, and the internet of things, such as self-driving buses, Pang said.

Meanwhile, increasing numbers of infrastructure projects that kicked off last year have passed from the investment to the production stage, boosting manufacturing activities such as electronic equipment production, she said.

Last month's PMI data also signaled, however, that the economic recovery is still fragile. Manufacturers continued to cut payrolls as the employment sub-index remained low at 47.3, unchanged from November, and small manufacturers saw worse conditions, with their PMI down to 47.2 from 49.4 the previous month, according to the NBS.

To sustain the recovery and fulfill the goals of building a moderately prosperous society in all aspects by 2020, the government may strengthen countercyclical measures at the start of this year, a Huatai Securities report said.

Monetary authorities may soon roll out targeted measures to facilitate financing of small businesses and manufacturers, while fiscal support may help infrastructure investment growth to rebound in the first quarter, the report said.

China's non-manufacturing activities expanded slower last month, with the non-manufacturing PMI dropping to 53.5 from November's 54.4, the NBS said.

Source: China Daiy