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China's economy shows signs of modest recovery

November 09, 2012|By David Pierson
  • A worker pulls a cart at a construction site in Shanghai, China.
A worker pulls a cart at a construction site in Shanghai, China. (Associated Press )

BEIJING -- The Chinese economy was deluged with promising news Friday after officials released October data that showed consumer price inflation slowing to its weakest pace in three years and industrial production and investment stabilizing.

The positive indicators come days before China unveils its new Communist Party rulers during a once-a-decade power transition. The country’s previously overheated economy has slowed for seven consecutive quarters, heightening pressure on the central government to expedite badly needed reforms.

“What a lovely dataset to welcome in China’s new set of leaders,” said Alistair Thornton, an analyst for IHS Global Insight in Beijing. “The stabilization looks to be on firmer ground."

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Thornton echoed consensus among analysts that China would begin a modest recovery because of efforts over the summer to launch new public works projects and release liquidity in the banking system.

“The bottom line is that the economy remains very sluggish, although the good news is that there’s surely not a huge amount more slowdown to come,” Thornton said.

China’s consumer prices grew 1.7% in October from a year earlier, down from 1.9% growth in September. Analysts credited rising food production for the tapering prices. Declining inflation gives policymakers more room to ease bank lending if necessary.

“Although inflation will start to creep back up in the coming months, the outlook remains benign and should leave enough room for Beijing to maintain its current easing bias to consolidate China’s growth recovery,” said Qu Hongbin, an economist for HSBC.

Industrial production grew 9.6% year-on-year in October, up from 9.2% growth in September.

Meanwhile, fixed asset investment, a gauge of construction in urban China, grew 20.7% from January to October compared with the same period a year ago. That was a tick above the 20.5% growth between January and September.

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