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China's manufacturing sector expanded at its fastest pace in two years.

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China's manufacturing sector continues to expand in 2013, according to HSBC

The China Manufacturing Purchasing Managers' Index rose to a two-year high of 51.9

Another sign that the world's second largest economy is picking up steam

China’s manufacturing sector continues to expand in 2013, according to a closely-watched indicator – another recent sign that the world’s second largest economy is picking up steam.

HSBC’s initial China Manufacturing Purchasing Managers’ Index (PMI) rose to a two-year high of 51.9 in January. Any reading over 50 indicates an acceleration in growth.

“Thanks to the continuous gains in new business, manufacturers accelerated production by additional hiring and more purchases,” HSBC’s Chief China Economist Qu Hongbin wrote in a statement. “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.”

The data from HSBC showed China’s manufacturers are seeing a pickup in both new orders and employment, signs there may be growing optimism for the sector in 2013. HSBC’s China PMI is seen as a forward-looking indicator, based on surveys with executives in over 420 manufacturing companies. The full reading will come out on February 1.

Last week, China reported better than expected 7.9% growth for the fourth quarter, figures that helped ease fears the country might be headed for a severe slowdown. While still expanding at levels most developed nations would envy, China’s economy is no longer the juggernaut it once was. The country averaged growth around 10% for nearly three decades on the back of its manufacturing sector.

Data out last week showed industry still makes up 38% of GDP. Many hope to see China build its consumer sector so that shoppers in the world’s second largest economy can help lift global growth. It’s a goal the government supports, according to its twelfth five-year plan (2011-2015), which calls for an increase in domestic consumption and growth of the service sector by four percentage points.