China's manufacturing sector is expected to continue expanding in 2018 despite the slight decline of an index, said investment bank China International Capital Corporation (CICC).
China's manufacturing purchasing managers' index (PMI) came in at 51.6 in December, slightly decelerating from 51.8 in November, according to the National Bureau of Statistics (NBS) data released Sunday.
The moderate decline in headline PMI was mainly attributable to the lower inventory, while production growth remained solid despite the "unfavorable working day effect," as there were two fewer working days in December 2017 compared with last year, said a CICC research report.
However, it is worth noting that China's manufacturing continued to upgrade, it said. PMI for the high-tech sector picked up further to 53.8 in December from 53.2 in November, NBS data showed.
The investment bank also noted the "strong momentum" that the Chinese economy's external demand growth had maintained.
The New Export Orders Index picked up notably to 51.9 from 50.8 in November, "partially driven by the rush of holiday season orders," said CICC, adding that China's export demand may continue to benefit from a global synchronized recovery.
Despite the negative impact from the working day effect and lower inventory, December manufacturing PMI indicated that the Chinese economy continued to pick up strength, CICC said.
China's economic recovery and manufacturing capacity expansion cycle are likely to be in the early days and have more legs to run on, CICC said, reiterating its outlook for the Chinese economy in 2018.