Factory boom adds to hope for return of rapid growth in China

Ben Southwood
Follow Ben
CHINA hit an eight-month high for manufacturing output last month, giving extra hope the economy is on its way back to double digit growth.

Factories produced 10.1 per cent more output in November than a year earlier, according to data from the National Bureau of Statistics, the best yearly growth since March.

The good news came among a swathe of upbeat data releases. Retail sales grew 14.9 per cent in the year to November. And fixed capital formation soared 20.7 per cent in the first 11 months of the year, compared to the same period in 2011.

“The Chinese economy is now in a sweet spot and can stay in the sweet spot through the first half of 2012,” said Ting Lu at Bank of America Merrill Lynch, typifying economists’ hopes that the economy has successfully fought its way out of slowdown.

And though inflation bounced up from a 33-month low to hit two per cent, this was well under Beijing’s four per cent target. Factory gate prices showed a ninth straight month of declines, suggesting the short-term risk was more likely to be deflation than inflation.

Analysts predicted the tranche of positive data would convince rate-setters and policymakers to keep a hold on policy for the time being.

“The central bank may stick to its current policy stance, and we see little chance of further policy loosening towards the year end,” said Jiang Chao at Guotai Junan Securities.