Asia's economy has bottomed and growth will pick up heading into 2013, a top official at the International Monetary Fund said in upbeat remarks backed up by buoyant Chinese data released Thursday.

"Asia has stabilized. The last two quarters in China have picked up slightly. We project growth to pick up next year," Anoop Singh, chief of the IMF's Asia and Pacific Department, said in an interview.

The Washington-based fund forecasts Asia's economy to grow 5.4% this year and 5.9% in 2013, and expects China's economy--the world's second-largest--to grow at a healthy 7.8% this year and 8.2% in 2013. This will help buffer the region as the U.S. and European economies gradually recover.

Mr. Singh's view echoes a bullish outlook from the Organization for Economic Cooperation and Development, which this week said strong domestic demand will spur Southeast Asian economies to grow as fast in the next five years as they did before the latest global financial crisis.

Manufacturing activity across Asia is showing renewed signs of life. A preliminary gauge of China's manufacturing activity in November showed the first expansion in 13 months, reinforcing evidence of a turnaround for the Chinese economy. The preliminary HSBC China Manufacturing Purchasing Managers Index, a measure of nationwide manufacturing activity, rose to 50.4 in November compared with a final reading of 49.5 in October, HSBC Holdings PLC said Thursday.

Recent export volumes from South Korea and Indonesia also indicate better demand, although other manufacturing centers including Taiwan and Singapore remain in the slow lane. Analysts are broadly downbeat about Japan's prospects after it posted its fourth-straight monthly trade deficit in October.

Mr. Singh said a resolution of the U.S. "fiscal cliff" debate--with a package of automatic tax hikes and spending cuts set to take effect soon--and European progress on stabilizing the situation in Greece would give a vital confidence boost to the world economy.

"There are clear risks from advanced economies. So far Asia has held out. Were there to be a new greater shock clearly there would be an impact," he said.

The IMF forecasts China's economy--the world's second-largest--will grow 7.8% this year and 8.2% in 2013.

Describing China's tightly controlled currency, the yuan, as undervalued--something which has been a source of tension with its major trading partners--the IMF official said Beijing has already done much to adjust its economy so that it relies less on exports for growth, and more on consumption.

"Clearly many exchange rates, including China's, are undervalued, but we have to look at the broader package and the need to shift towards more consumption and financial market liberalization," Mr. Singh said.

The IMF official welcomed the start of Asian leaders' negotiations aimed at creating one of the world's biggest trade pacts by 2015.

Sixteen countries including China, Japan, India and Australia hope to establish the Regional Comprehensive Economic Partnership, or RCEP, which officials say will allow a greater flow of goods and services and avoid overlapping deals, as countries in the region pursue bilateral and trilateral trade agreements.

The U.S. hopes to have a separate Pacific Rim trading pact in place by the end of next year, and China, Japan and South Korea are considering their own trilateral deal.

"This comes down to economic integration. We have learned lessons from Asia and other parts of the world that this is what is needed," Mr. Singh said. "More cooperation, more integration is needed."

TODAY