China HSBC flash PMI hits 2-year high in January

On the other hand, analysts said the gentle up-swing in domestic activity appears to be sustainable and should drive China's economic recovery.

"The consumer is coming back," said Tim Condon, an ING economist in Singapore.

Chinese shoppers have spent more in recent months after the country's successful leadership change last year and a stabilising euro zone raised confidence, he said.

"Manufacturers are seeing the pick-up in spending growth as a reason to expand production," Condon said.

General Motors Co said last week it will add 400 dealers in China this year as it looks to keep growing faster than China's overall automotive industry which is expected to expand by 8 percent this year.

EXPORT ORDERS RECOVER

The new export orders sub-index rose to 50.1 in January, up from December's 49.2 that pointed to waning demand.

The sub-index was persistently weak in the past year, rising above the 50-point threshold for only three months in 2012 and at times contradicting China's official trade data.

HSBC's final PMI had showed China's new export orders cooling in December, at odds with government data that said exports zoomed to seven-month highs that month.

The jump in exports, alongside generous government investment in infrastructure, helped to pull China's economy out of its worst downturn in three years between October and December to grow 7.9 percent from a year earlier.

But the late spike in activity was not enough to prevent China from sinking into its slowest annual pace of economic expansion in 13 years in

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