Beijing, Dec 31 (AFP) China's factory activity was in expansion territory for a second straight month in December amid a thaw in a trade war with the United States, official data showed Tuesday.

The closely watched Purchasing Managers' Index (PMI), a key gauge of activity in the country's factories, was at 50.2 in December, posting the same gain as the previous month, according to the National Bureau of Statistics (NBS).

The reading -- slightly above the 50-point mark that separates growth and contraction every month -- beat a forecast of 50.1 by analysts surveyed by Bloomberg News.

China's manufacturing activity rebounded in November after six straight months of contraction.

Demand ahead of the Chinese New Year holiday in January contributed to the growth, the NBS said.

The non-manufacturing activity index slowed, dropping to 53.5 from 54.4 in November.

But the December reading is still high thanks to optimism in the service industry, the NBS said.

"The extended strength in the official manufacturing PMI certainly looks positive for markets, but we believe this may not be sustainable, and the economy has yet to hit the bottom," Ting Lu, chief China economist at investment bank Nomura, said in a note.

"We expect Beijing to roll out more easing measures despite limited policy room in coming quarters," Lu added.

It has been a tough year for China's economy, which is expanding at its weakest rate for three decades as it is buffeted by a long-running trade war with the United States as well as a slowdown in global demand for its goods.

Some relief may be on the horizon as Beijing and Washington are expected to sign a mini trade deal in January. (AFP)

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