By Chris Oliver, MarketWatch HONG KONG (MarketWatch) -- China's manufacturing activity accelerated in December at its fastest pace in several years, according to data compiled by two competing industrial surveys. Industrial activity climbed for the ninth straight month in December, according to the HSBC purchasing managers' index (PMI) released Monday, with overall conditions during the December-ended quarter the most robust in the survey's six-year history. An alternative PMI published Friday by the official China Federation of Logistics and Purchasing showed manufacturing reached a 20-month high in December. See full story on CFLP's China PMI for December. HSBC's PMI rose to 56.1 for the month, compared to 55.7 in November, marking the ninth consecutive month of gains. Measures for labor demand and new orders also suggested a broad-based revival of activity. "The second-round effect of stimulus measures is filtering through to substantially benefit the manufacturing sector," HSBC's chief economist for China, Hongbin Qu, said in a note published Monday. The PMI also indicated inflation was on the rise, with finished-goods prices up sharply because of strong demand and higher input costs. Still, HSBC said it expected inflationary pressures to remain "manageable" in coming months. The HSBC survey revealed that companies were adding new staff at their third-fastest pace since the data stream began six years ago, although the number of jobs created had eased slightly compared to the rapid clip during the last two months. Federation's PMI agrees The results from HSBC, took over the index from broker CLSA last year, were broadly in line with those from the China Federation of Logistics and Purchasing. The CFLP PMI showed conditions remaining above the expansionary threshold of 50 for the 10th straight month. The Federation's PMI came in at 56.6 in December, up from 55.2 in the previous month, representing the biggest month-on-month rise since March. The dominant theme of the PMI, was the broadening strength of China's recovery, as 17 of the 20 industries tracked by the survey showing an expansion in activity. Metals producers showed the strongest gains, while tobacco was at the low end. "It suggests the expansion of economic activities gathered further momentum from November to December," Bank of America Merrill Lynch strategist Ting Lu wrote in a research note Monday. Merrill forecast China's industrial sector will continue to mark gains in coming months, bolstered by improving exports, private investment, and government stimulus projects. However, Chinese stocks traded on a generally weaker note in late morning trade Monday. The mainland-China-focused China Enterprises Index in Hong Kong was down 0.3%, while the Shanghai Composite fell 0.4%. The Federation PMI's new "export orders" component fell slightly for the second straight month, but remained in positive territory. Meanwhile, the readings for new orders and output both indicated acceleration. Inventories of finished goods ticked up slightly in December, but the reading indicated suppliers' shelves were relatively slim by historical standards. "We think restocking is not over yet and industrial output will remain strong in coming months," said Lu. J.P. Morgan said it expects China's growth momentum to continue throughout 2010. Home construction activity showed few signs of slowing even though authorities have tightened regulations on mortgage lending, as well as on development and land-purchases. But J.P. Morgan's Jing Ulrich said in a note: "Construction activity should remain relatively strong, as housing supply will be boosted to address the current shortages."

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