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October 23, 2009

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Autos and steel fuel fastest output growth

CHINA'S industrial output grew at the fastest pace in more than a year last month on strong auto and steel production.

Industrial production surged 13.9 percent last month from a year earlier, after rising 12.3 percent annually in August, the National Bureau of Statistics said yesterday.

Urban fixed-asset investment jumped 33.3 percent in the first nine months of this year, the bureau said, boosted by the government's 4-trillion-yuan (US$586 billion) stimulus spending.

The industrial output data showed the country's economic recovery is strengthening, but they also underscored the challenge the government faces in reining in overcapacity.

For example in the steel industry, the crude steel output rose 29 percent to 50.71 million tons last month, according to figures released by the bureau yesterday. This is the second-highest ever in history, following August's record 52.33 million tons. On a daily basis, output in September matched August's all-time high of 1.69 million tons, despite recent government efforts to rein in overcapacity in certain industries.

Worse, figures from the China Iron and Steel Association this week showed production remained high at the start of this month.

Still, some analysts said they see an improved structure in industrial output as the gap between growth in light and heavy industries is narrowing.

Output of heavy industry, which is mainly led by government stimulus spending, rose 14.8 percent last month. Production in light industry, which is more consumer-oriented, was up 11.8 percent.

This represents a growth differential of 3 percentage points, against 3.4 percentage points in August.

"A narrowing gap is what we want to see as it shows a more balanced structure," Haitong Securities analyst Liu Tiejun said.


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