China's Purchasing Managers' Index (PMI) rose to 45.3 percent in January from 41.2 percent in December while estimates of retail sales put January 13.8 percent up on the same period 2008.

There is a strong correlation between PMI, an indicator of actvity in the manufacturing sector, and GDP, suggesting China's GDP for the first quarter of 2009 may look better than that of the last quarter of 2008.

China's manufacturing sector has been in contraction for four consecutive months after the PMI fell below 50 percent last July, plunging to a record low of 38.8 percent in November.

Mainland steel shares rise; Hong Kong slightly up

On the markets, mainland stocks declined with steel forming the only driving force after the state cabinet approved measures to boost the equipment-manufacturing industry.

Steel shares advanced 2 percent on average. Gansu Jiu Steel Group Hongxing Iron and Steel Co. (600307,SH), the listed unit of the second-biggest steelmaker in northern China, surged 9.78 percent. Liuzhou Steel & Iron Co. (600103,SH) rose 3.62 percent.

The Shanghai Comprehensive Index dropped 0.46 percent to 2098.02. Industrial and Commercial Bank of China (601398,SH;01398) declined 1.04 percent on its Shanghai trading but increased 3.87 percent in Hong Kong.

The Hang Seng Index rose 0.88 percent to 13178.9. Franshion Properties (00817, HK) surged 11.66 percent. Ping An Insurance (02318) rose 6.96 percent.

Disappointing stimulus move for China's textile industry

China will increase the tax rebate rate for textile and garment exports from 14 percent to 15 percent, less than the expected rise to 17 percent.

This is one of the measures suggested in the national plan to invigorate China's textile industry. The government will also allocate funds for companies that produce textiles or fibers, or operate in the textile printing and dyeing sector, to upgrade technology and develop domestic brands.

The textile industry suffered severe difficulties since last year due to appreciation the Renminbi, a liquidity shortage and a rise in the costs of production materials. Textile and garment exports grew 8.2 percent in 2008, 10.7 percentage points lower than in 2007.

Textile shares dropped 2.7 percent on average. Huafang Co .(600448,SH) declined 5.13 percent. Shanghai Dragon Co. (600630,SH) dropped 4.89 percent.