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Industrial output set for priority treatment

CHINA'S industrial output will continue to face hard times this year despite the government's stimulus plan, a Cabinet minister said yesterday, adding that it's too early to talk about a recovery.

"Our first priority this year is to revive industrial production," Li Yizhong, head of the Ministry of Industry and Information Technology, told reporters on the sidelines of the Chinese People's Political Consultative Conference in Beijing.

Growth in the nation's industrial output reached an eight-year low of 5.4 percent in November and edged up only to 5.7 percent in December. For all of 2008, output rose 12.9 percent, down 5.6 percentage points from the year before.

Li said although he has seen positive signs over the past two months, there are still challenges to overcome in reversing the slowdown in industrial production.

China is set to report the combined industrial output figure for January and February on Thursday. That figure will eliminate the effects of the Spring Festival holiday, which fell in January this year and February last year.

"We can't easily talk about recovery," Li said. "We must ensure that all the policies, including the industry stimulus policies, are fully implemented."

China has launched a 4-trillion-yuan (US$585 billion) stimulus package to boost investment in infrastructure and industrial projects and has also set out preferential policies for key sectors including steel, textiles and oil.

The country's purchasing managers' index, an important gauge of manufacturing, was below 50, which marks the midpoint between growth and contraction, for the fifth month in a row in February, although it did rise nearly four points to 49.

Analysts said the rise was encouraging, but they cautioned that industrial output won't improve fundamentally if there's no significant rise in demand.

"We expect industrial output to rebound in the near term, but its growth rate could remain weak over the longer period because demand won't pick up quickly," said Hu Yuexiao, an analyst at Shanghai Securities Co.


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