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November 12, 2009

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Home » Business » Economy

New signs point to steady recovery

CHINA'S strong economic performance in October provided further evidence of a strengthening recovery, and analysts believe the state will maintain its macroeconomic policies to secure the progress made so far.

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

"China's October data beat our expectations," said Li Maoyu, an analyst at Changjiang Securities Co. "The momentum may carry on, and it is time to say we have passed the worst period in the worldwide recession."

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

But drops in imports widened. They 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. As such, the trade surplus increased to US$24 billion last month from US$12.9 billion in September.

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

"But the overall trade data suggest external demand is becoming stronger. That helps to boost the recovery, which remains largely dependent on 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 of faster growth, the National Bureau of Statistics said yesterday.

Urban fixed-asset investment in the first 10 months jumped an annualized 33.1 percent to 15.1 trillion yuan (US$2.21 trillion), little changed from the growth through the third quarter.

Retail sales advanced 16.2 percent in October from a year earlier to 1.17 trillion yuan, 0.7 percentage points faster than the month before.

China's encouraging economic performance has prompted several financial institutions to upgrade their forecast for the country. Moody's Investors Service changed China's ratings outlook to positive from stable on Tuesday, while the World Bank raised its prediction for this year's China economic growth to 8.4 percent from a 6.2 percent estimate in June.

Though the figures painted a brighter outlook for China's recovery, the country can't shift from its relaxed fiscal and monetary policies in an abrupt manner, analysts said.

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

He said China may raise interest rates in the third quarter next year.

China's Consumer Price Index, the main gauge of inflation, dropped 0.5 percent year on year in October, compared with a 0.8 percent fall in September. The Producer Price Index, the factory-gate measure of inflation, moderated to 5.8 percent in October from 7 percent a month earlier.


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