China output data reinforces view economy has steadied

Tue Sep 10, 2013 5:15am EDT
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By Kevin Yao

BEIJING (Reuters) - Stronger-than-expected industrial output reinforced other signs that China's economy was stabilizing after slowing for more than two years, just as major emerging markets brace for potential fallout from an expected trimming of U.S. stimulus.

Factory output growth hit a 17-month high and retail sales grew at their fastest pace this year in August, increasing confidence that after contracting in nine of the past 10 quarters, the world's second-largest economy may be regaining some momentum.

But any recovery is set to be bumpy. China's leaders have made it clear they can accept slower growth as they try to wean the economy off a dependence on investment and exports in favor of domestic consumption.

And investors are worried about how emerging economies will fare when the U.S. Federal Reserve tapers its monetary stimulus, possibly as soon as next week, although analysts say China is better positioned than others to cope with capital outflows.

"The better-than-expected figures showed the recovering momentum of China's economy is stronger than market expectations," Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.

The government has set a growth target for 2013 of 7.5 percent, which would be the weakest in more than two decades.

As recently as a month ago, investors worried China could miss even that target, after domestic money markets were hit by an unprecedented cash crunch and annual growth slowed to 7.5 percent in the June quarter.

Since mid-year, a series of targeted steps by authorities, including quickening railway investment and public housing construction and introducing policies to help smaller companies, have built confidence, and data signals have been more positive.   Continued...

An employee works inside a silk factory in Neijiang, Sichuan province, in this July 3, 2013 file photo. China's factory output grew at its fastest pace in 17 months and investment and consumption beat market forecasts, increasing confidence among investors that the world's second-largest economy has halted a slide and is building some momentum. REUTERS/China Daily/Files