An important gauge of China’s giant manufacturing sector published Tuesday showed a third successive month of expansion in December and underlined the view that the world’s second-largest economy has settled into a mild rebound that is likely to extend into 2013.

A survey of purchasing managers in the manufacturing sector, released by the national statistics bureau on the first day of the new year, produced a reading of 50.6 points for December. Figures above 50 mean the sector is growing, while those below suggest contraction.

A similar survey released by HSBC on Monday painted a similar picture of solidifying recovery. That index, which is more focused on smaller, privately held businesses than its official counterpart, came in at 51.5 – a full point above the November reading, and the highest in 19 months.

After a marked slowdown during much of 2012, the Chinese economy began to regain some momentum during the last few months of the year. A modest increase in exports, combined with government-induced infrastructure spending and other economy-supporting measures, dissipated fears of a ‘’hard landing’’ during the final quarter of 2012. Analysts widely expect the economy to have expanded about 8 percent in 2012, and to record similar or even slightly stronger growth in 2013.

At the same time, however, analysts caution that the Chinese economy will need to grapple with a host of major challenges and that growth is likely to slow by several percentage points over the next decade.

‘’Looking forward, China’s cyclical rebound still faces strong headwinds,’’ Li-Gang Liu and Louis Lam, economists at ANZ, commented in a research note on Tuesday. ‘’Economic and policy uncertainties in the U.S. and the E.U. suggest that external demand for Chinese exports will remain sluggish.’’

Domestically, the government is grappling with rampant corruption and environmental degradation, a widening gap between rich and poor, and the need to reduce the dominance of state-owned enterprises. For growth to be sustainable, the economy will also need to become more driven by domestic demand, rather than government-induced investment and exports, analysts believe.

China’s rapidly changing demographics — an aging population will cause the proportion of non-earners to soar in the coming years — is adding considerable time pressure.

‘’The problem is not so much how to maintain short-term growth momentum, but how to prepare China for the demographic challenge ahead,’’ Yao Wei, an economist at Société Générale in Hong Kong, said at a media briefing in last month. ‘’Within ten years, China will have worse demographics than South Korea or Japan. The window of opportunity for policymakers is closing very quickly,’’ she added.

Article source: http://www.nytimes.com/2013/01/02/business/global/chinese-manufacturing-sector-expanded-in-december.html?partner=rss&emc=rss