Chinese manufacturer saw profits surge in December, indicating an improvement in the world's second largest economy.

According to data released Monday by the National Bureau of Statistics of China (NBS), profits of industrial companies in the country rose 17.3 percent in December compared to the same month of the previous year following an increase of 22.8 percent in November.

This report comes after it was revealed last week that China's manufacturing activity expanded to a two-year high in January, according to the HSBC Purchasing Managers’ Index (PMI). The preliminary flash reading of the PMI, a measure of the nationwide manufacturing activity, rose to 51.9 in January compared to 51.5 in December. Significantly, the index continued into the expansion zone, a reading above 50. The expansion of the manufacturing activity should allay fears about a sharp retraction of the Chinese economy.

Earlier this month, it was reported that China’s economy rose at a better-than-expected rate in the fourth quarter of 2012, indicating a revival of the economic growth momentum of the country. According to the data released this month by the NBS, the country’s gross domestic product, which measures the annualized change in the inflation-adjusted value of all goods and services produced, rose to 7.9 percent in the fourth quarter of 2012, from 7.4 percent in the third quarter and above the analysts’ average estimate of 7.8 percent.

The data released by the NBS also showed that the country’s industrial production, which measures the change in the total inflation-adjusted value of output produced by manufacturers, mines and utilities, rose 10.3 percent in December, from 10.1 percent in November.

However, the analysts are not fully optimistic about the revival of China’s growth as the global economic conditions continue to be weak amid the debt crisis in the euro zone. It was also reported earlier in the month that China’s inflation rate accelerated faster than expected in December, making inflation a continued cause of concern and lowering the prospects for a further loosening of monetary policy. The data from the NBS released this month showed that the consumer price index of China rose 2.5 percent in December compared with that in the same period in the previous year, up from 2 percent in November.

Market participants hope that policymakers will soon announce monetary easing measures to help spur industrial activity. However, inflationary pressures have added to the concerns about the slowdown in economic growth, as they pose a major obstacle for the central bank to assertively cut interest rates.