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China manufacturing hits two-year high

China's manufacturing activity has reached a two-year high, according to a survey.

A preliminary version of HSBC's monthly purchasing managers' index rose for the fifth month in a row to 51.9 in January, up from 51.5 in December.

Readings above 50 on the 100-point scale indicate an expansion and the rise is a sign the world's second-biggest economy is coming out of a downturn.

HSBC's chief China economist, Qu Hongbin, said gains in new business allowed manufacturers to step up production by adding jobs and making more purchases.

"Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China's ongoing recovery in the coming months," Qu said.

The Chinese economy expanded 7.9 percent in the final quarter of last year, up from 7.4 percent in the previous quarter, according to data released this month.

For all of 2012, the economy expanded 7.8 percent, the slowest annual performance since the 1990s.

Many analysts predict the rebound will peak in coming months before easing off to produce growth of about 8 percent this year.

HSBC's index is based on responses from 85 to 90 percent of purchasing executives surveyed at 420 manufacturers. The full version is due next week