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Economic recovery consolidating

CHINA'S October economic performance proved the recovery in the world's third-largest economy is consolidating, but analysts suggest the relatively loose monetary policy should remain to maintain the recovery.

Exports declined at the slowest pace this year while manufacturing production, infrastructure investment and retail sales all remained strong, according to data released today. Drops in consumer and producer prices eased.

Overseas shipments, the hardest hit sector by the global financial crisis, fell 13.8 percent from a year earlier to US$110.7 billion last month. It moderated from the retreat of 15.2 percent in September and became the smallest decline so far this year, the General Administration of Customs said today.

But falls in imports widened. It contracted 6.4 percent year on year to US$86.7 billion in October, compared with a slip of 3.5 percent a month earlier. Trade surplus thus increased to US$24 billion last month, compared with US$12.9 billion in September.

"China's reduced imports is probably a result of the country's recent strengthened determination to fight against overcapacity, which prompted producers to buy less raw materials from overseas markets," said Xue Jun, an analyst at CITIC Securities Co.

"But the overall trade data suggest the external demand is becoming stronger. It helps to boost the recovery, although which remains largely dependent on resilient domestic demand."

In October, China's industrial output rose 16.1 percent on an annual basis, up 2.2 percentage points from a month earlier. It was the sixth straight month that industrial output posted faster growth, the National Bureau of Statistics said today.

Retail sales advanced 16.2 percent from a year earlier to 1.17 trillion yuan in October, 0.7 percentage point quicker than a month ago.

Despite the figures painting a brighter outlook for China's recovery, the country shouldn't change its relatively easy fiscal and monetary policy stance abruptly, analysts said.

"Policy stance is key to upholding people's confidence. It is still too early to talk about exit of the relatively loose policy," said Wang Qing, a Morgan Stanley economist.

China's Consumer Price Index, the main gauge of prices, still dropped 0.5 percent year on year in October. Producer Price Index, the factory-gate measure of inflation, also fell 5.8 percent last month.


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