The Purchasing Managers' Index (PMI) of China's manufacturing sector climbed 2.4 percentage points month-on-month to 41.2 percent in December, China Federation of Logistics and Purchasing (CFLP) told Xinhua on Sunday.

The index has been lower than 50 percent for three consecutive months. It was also the fifth time the index remained below 50 percent within last year after it fell to a record low of 38.8 percent in November.

The new monthly figure reflected the country's economy had further contracted, analysts said.

A reading above 50 percent suggests expansion, while one below 50 percent rings alarm for economic slowdown.

The PMI included a package of indices used to measure a country's monthly economic performance. China's PMI was conducted on the base of surveys directed at purchasing and supply managers of more than 700 manufacturers across the country.

Indices measuring new orders rose 5.0 percentage points to 37.3 percent in December. New orders for export rebounded by a slight 1.7 percentage point to 30.7 percent from the previous month.

The sub-index of output rose to 39.4 percent, up 3.9 percentage points. Purchasing prices were up 6.1 percentage points to 32.7 percent, the first increase after five straight months of significant drops.

Despite rebounds in most sub-indices, all indices, except the supplier's delivery time, were lower than 50 percent.

Of the 20 industries involved in the PMI calculation, only the beverage and pharmaceutical manufacturing industries were above 50percent, while ten industries including non-ferrous metal smelting, chemical fiber and transport equipment manufacturing industries were under 40 percent last month, the CFLP said in an email statement.

Zhang Liqun, a researcher with the Development Research Center of the State Council, China's Cabinet, said the PMI figure indicated the economy remained in the tank but the number of purchasing managers who were bullish on the economy was on the rise.

He said with previous macro-management policies taking effect, the economy would embark on a relatively fast growth track after the spring next year.

China unveiled an economy stimulus package last month with a total of 4 trillion yuan (US$583.4 billion), equivalent to nearly 78 percent of last year's national fiscal revenue, to be invested in the next two years to boost domestic demand and improve people's quality of life.

China's ministries, agencies, and local governments have announced investment plans since the Cabinet announced the stimulus package.

(Xinhua News Agency January 4, 2009)