China HSBC PMI survey shows manufacturing sector growth reviving, but economic growth uneven

"The improving numbers are mostly because of government investment," said Dong Xian'an, economist with Peking First Advisory, referring to the official PMI.

"From the second quarter the government has unleashed a lot of projects, and that has started to be felt in the economy, but it's not a very healthy recovery yet."

In another sign that demand remains lacklustre, an HSBC sub-index for output prices fell despite a rise in a different sub-index for input prices, indicating that firms are unable to pass rising costs on to buyers.

"Whilst we feel that the economy has been stabilized through the short-term, we feel that the manner in which activity has been revived will retard China's economic reform agenda and make the transition onto a sustainable footing all the more tricky," wrote Xianfang Ren and Alistair Thornton of IHS Global Insight.

UNEVEN GROWTH

Smaller and private firms are still pleading for greater access to credit and investment incentives, which have gone disproportionately to the state sector, particularly since the financial crisis of 2008-2009.

Government intervention to mask debt problems where they do appear runs the risk of a socialisation of losses, the his Global Insight analysts warned.

"Production can continue (hence contributing to GDP), and employment can remain tight. Our fear, therefore, is that whilst activity is resuming, economic efficiency is declining. This has negative longer-term consequences."

Overall, China's economic health has improved since September, with an array of indicators from factory output to retail sales and investment showing Beijing's pro-growth policies are starting to

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